Gold is a risk asset one actually flees to.
It is a liquidity sink in good times.
It is a store of value in bad times.
Ones goes to gold when the system is under stress. One stays in gold when the stress has been relieved using ZIRP and QE. Show me trust and the truth I will sell my gold.




Challenging The Wolfpack Posted: May 09 2010 By: Jim Sinclair Post Edited: May 9, 2010 at 8:01 pm
Filed under: General Editorial
Dear CIGAs,
A nuclear solution to Europe’s debt problems is simply another way of saying "Quantitative Easing to Infinity."
All national debt will be bailed out. All states of the USA will be bailed out.
Paper currencies are headed to dust.
Regardless of the first knee jerk market reaction, gold is going to $1650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.
Credit default swaps are herein called the "Wolfpack." About that they are totally correct.
Now that they have challenged the "Wolfpack," whatever additional funds might be required will have to be provided or the "Wolfpack" will slaughter the EU.

EU Preps Euro Fund to Fight ‘Wolfpack,’ Debt Crisis By James G. Neuger and Meera Louis
May 9 (Bloomberg) —
European Union finance ministers pledged to stop a sovereign-debt crisis from shattering confidence in the euro as they held an emergency summit to hammer out a lending mechanism that may be worth around $645 billion.
Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed on the backstop yesterday and told ministers to get it ready before Asian markets open. The European facility may be worth around 500 billion euros, said an official familiar with the talks.
“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair today’s Brussels meeting. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”
Europe’s failure to contain Greece’s fiscal crisis triggered a 4.3 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted the U.S. and Asia to urge broader steps to prevent a debt crisis from pitching the world back into a recession.
President Barack Obama spoke by phone with German Chancellor Angela Merkelfor the second time in three days, adding to the international pressure Europe has faced since a hurriedly arranged conference call of Group of Seven finance chiefs on May 7. Obama today emphasized “the importance of the members of the European Union taking resolute steps to build confidence in the markets,” White House spokesman Bill Burton told reporters in Hampton, Virginia.
‘Wolfpack Behavior
“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”
European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the EU’s central authorities with guarantees by national governments. The meeting started just after 3 p.m.
Expectations of decisive action buoyed the euro as trading began in Asia. It jumped more than 1 percent to $1.2897 as of 6:11 a.m. in Sydney, according to pricing from Westpac Banking Corp.
More…



Thoughts For The Day
A euro "save" technically is a pound trading firmly above $1.29. Please note Armstrong’s tome on currency values.
The volatility in gold is about to go ballistic. That is another key for gold at or beyond $1650.

Jim Sinclair’s Commentary
The spin is that the fall is a mystery and therefore an anomaly, not a selloff of significance indicative of further problems.
The truth of the matter is that what you saw here was a combination of computer based flash trading, below the horizon computer based exchanges, and algorithms gone wild.
This event is proof that computer markets lack specialists and are ticking time bombs of illiquidity. This problem is alive and well and looking for more repeat performances.

Plunge in US equities remains a mystery By Michael Mackenzie and Henny Sender in New York Published: May 7 2010 18:49 Last updated: May 7 2010 20:01

The day after $1,000bn was briefly wiped off the market value of US equities, traders were still trying to work out what caused share prices to plunge and then rebound so dramatically in a matter of minutes.
The conventional wisdom held that an incorrectly typed sell order – one that confused “billions” for “millions”, for example – was the likely culprit.
“The trigger for the sell-off was most likely some kind of errant order, a fat-finger typo, which set off a chain reaction of selling,” said Sang Lee, managing principal at Aite Group. “I would be shocked if that was not the case as the fall in stocks was so sudden and extreme.”
However, despite the persistence of this story, officials were struggling to idenfity a specific cause. “We still don’t know what was the initiating signal for the trading activity we saw on Thursday,” said Jeff Wecker, chief executive officer at Lime Brokerage. “The verdict is still out.”
What was clear was the ferocity of the fall. Just before 2.40pm on Thursday, the S&P 500 index, the US equity market’s benchmark, fell from 1,120. Inside six minutes, it bottomed at 1,065.79, a slide of nearly 5 per cent. By 3.00pm, the index was moving above 1,120, although still down 4 per cent on the day before, settling 3.2 per cent lower by the close.
More…

The Subprime Rhyme with U.S. Debt Debacle,

Greek debt crisis offers preview of what awaits U.S.

Freddie Mac Posts First Quarter Loss of $6.7 Billion, Asks Treasury for $10.6 Billion

Britain Must Cut Deficit Fast, Europe Warns

America at the Crossroads and the War on Gold

S&P to Gold Ratio: On Verge of 1.00 Breakdown

The Great Depression of the XXI Century

Debt Crisis: Panic on Wall Street, Stonewalling in Europe

Japan Injects $20 Billion to Calm Markets

Raising taxes
So, there is a massive buildup of public debt. And the lesson of history is that unless this buildup of sovereign debt is tackled eventually by raising taxes and controlling spending, then there are only two outcomes: default or high inflation.
Historically, we have seen a series of defaults and sovereign debt crises in both advanced and emerging market economies. If you are a country like the US, the UK or Japan that can monetise its fiscal deficits, then you won't have a sovereign debt event but high inflation that erodes the value of public debt. Inflation is therefore basically a capital transfer from creditors and savers to borrowers and dissavers, essentially from the private sector to the government.





Did Gold Finally Become The World's New Reserve Currency? AGAIN...





The Only Difference For The US From Greece Is That It Can Print More Money








U.S. gold coin sales surge as investors flee risk








Nouriel Roubini: US faces inflation or default








a great Fox News interview with Ron Paul about the Greece-soon-to-be-USA problems.








Could the U.S. Be the Next Greece?








Moody's Warning Portugal of Possible Debt Downgrade








Angela Merkel: EU Future At Stake in Greece Crisis








Peter Foster: Keynesian Contagion- Financial Post








Chinese Markets Slide as Jitters Take Hold








Hundreds Seek to Fill Positions After Illegals Fired








UK Mortgage Lending Dives 83%








Won't be long for this to hit the U.S....Oh wait... it's already starting in Detroit, They asked for the National Guard.


Three Die in Athens Riots Over Cutbacks, Debt Crisis








Greece Debt Crisis Coming to Neighborhood Near You?








Cheaper Gasoline May be Just Down the Road








WOW, I'm sure glad the recession is over...Don't you just love this recovery?

ALL HAIL OBAMA...

Broader Unemployment Rate Increases to 17.1%- Wall Street Journal








US Faces Same Economic Woes As Greece- CNBC








You can add another 100 BILLION we just gve to the IMF to bail out Greece...

Don't worry we will be bailing out the IMF next...

US Banks Heavily Exposed to Europe Debt Woes- CNBC

Main Street Is In The Hands Of A Roulette Wheel Posted: May 07 2010 By: Jim Sinclair Post Edited: May 7, 2010 at 10:10 pm
Filed under: General Editorial
Dear Extended Family,
The solution is the problem. To quote Bill Carleton’s album, Squeeze the People, "Main Street is in the hands of a Roulette Wheel." He is so correct.
The name of the "Roulette Wheel" is Credit Default Swaps. It does not matter what the G-7 or the G-20 does. It does not matter what the IMF, ECB and Fed under a beard do. Mrs. Merkel’s foolish political strategy fits right into the equation.
CDS are going to take down every major currency, making trillions for the players. It will in time turn on the USA as it is already operating against the financially weaker Illinois and New York debt.
The dollar, as it gains ground due to the mirror image of the euro, becomes weaker and weaker due to overvaluation with no fundamental legs. The dollar’s time will come.
The OTC derivative credit default swap is about to clean the clock of the world. Der Spiegel is right but the debt is there. It will not go away but only grow bigger. The situation is in the cross hairs of the richest people on the planet hell bent on getting richer. That is the message of the Dow dropping 1000 points regardless of how it happened.
Nothing the G-7 or G-20 does will stop the predetermined avalanche in the world of fiat currency. Armstrong is right in that when it comes time for the great coming apart it will be akin to the Big Bang.
You are either ready now, or there will be no chance of readiness. Right now ready means gold and gold equivalents. The last currencies to be attacked will be the Cando and the Swiss Franc.
It is all over. The fat lady has sung.
Respectfully, Jim


The Mother of All Bubbles Huge National Debts Could Push Euro Zone into Bankruptcy Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it. By SPIEGEL staff.
Savvas Robolis is one of Greece’s most distinguished economics professors. He advises cabinet ministers and union bosses. He is also a successful author and a frequent guest on the country’s highest-rated talk shows. But for several days now, it has been clear to Robolis, 64, the elder statesman of Greece’s left-wing academia, that he no longer has any influence.
His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was "icy."
Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece’s already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. "Don’t put Greece on ice!" the professor warned.
But the tall Dane was not very impressed. He has negotiated aid packages with Iceland, Ukraine and Romania in the past, and when he and his 20-member delegation landed in Athens on April 18, they had come to impose a rigorous austerity program on the Greeks, not to devise long-term growth programs.
Thomsen’s mandate is to save the euro zone. And any Greek resistance is futile.
Time to Foot the Bill
Robolis versus Thomsen. For the moment, this is the last skirmish between the old ideas and ideals of prosperity paid for on credit and a generous state, against the new realization that the time has come to foot the bill. The only question is: Who’s paying?
The euro zone is pinning its hopes on Thomsen and his team. His goal is to achieve what Europe’s politicians are not confident they can do on their own, namely to bring discipline to a country that, through manipulation and financial inefficiency, has plunged the European single currency into its worst-ever crisis.
If the emergency surgery isn’t successful, there will be much more at stake than the fate of the euro. Indeed, Europe could begin to erode politically as a result. The historic project of a united continent, promoted by an entire generation of politicians, could suffer irreparable damage, and European integration would suffer a serious setback — perhaps even permanently.
And the global financial world would be faced with a new Lehman Brothers, the American investment bank that collapsed in September 2008, taking the global economy to the brink of the abyss. It was only through massive government bailout packages that a collapse of the entire financial system was averted at the time.
More…



The Canary is Dead


Hedge Funds Betting More Downside to Come


Euro Will Collapse Like Tower of Babel: Economist


US Faces Same Economic Woes As Greece: Marc Faber


Debt Crisis May Spread to US, Japan: Roubini


Somebody Should 'Hang' the NYSE: Jim Rogers


Who told you to buy 2 years ago when you could have paid less then 800.00?
Don't worry Gold and Silver will atleast double from current prices very soon In fact it will move so violently even I will be amazed.

Dow Bobs Into Positive Territory; Investors Flock to Gold (Click here for full story)


Technical Focus: Gold Charts Show Bullish Price Uptrends Firmly in Place
http://www.kitco.com/reports/KitcoNews20100507_update2.html

DOW PLUNGES ALMOST 1,000 POINTS INTRA-DAY

Fat Finger Bullcrap



Jim Sinclair: Dow Falls 1,000 Points Intra-Day




Stock Selloff May Have Been Triggered by a Trader Error

The Dow plunged nearly 1,000 points before paring those losses, apparently triggered by a trader error. Sources told CNBC a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble.
Biggest Market Drops Ever


P&G Trades Won't Stand: NYSE CEO


EU, Euro Are Doomed: Dennis Gartman


Please take note of the NYT comment on gold:
Stock Markets Recover From 9% Drop, Finish Day Down About 3%
Wall Street reeled through a volatile day, with stocks closing sharply lower after recoiling from a brief plunge of nearly 9 percent. The Dow Jones Industrial Average closed down 347.80 points or 3.2 percent, and the S. & P. 500 index dropped 37.75 points or 3.24 percent, after fears over Europe’s debt crisis and computer-driven trading sparked a massive selloff. The euro slid to $1.2616 to the dollar, and investors fled to Treasuries, gold and other safe-haven investments.



Jim Sinclair’s Commentary
Reintroduce quantitative easing? It never stopped.
The banks have been the beards for the Fed buying US Treasury auctions.
Fed Faces Deflation With Few Weapons, Rosenberg Says: Tom Keene By Mary Childs and Tom Keene
May 5 (Bloomberg) — The Federal Reserve should be worried about deflation and has few weapons left in its arsenal to combat it, according to David Rosenberg, chief economist of Gluskin Sheff & Associates Inc. in Toronto.
Excess capacity in manufacturing, labor and housing is pushing prices down, Rosenberg said in a Bloomberg Radio interview today with Tom Keene, and interest rates at record lows leave the central bank with little means of countering deflation.
“What are the other options?” Rosenberg said. “Can they cut rates below zero? Well, unlikely. So what’s really going to be left? What is going to be the bullet left in the chamber to deal with the outright deflation?”
Fed Chairman Ben S. Bernanke and his colleagues aren’t in a hurry to withdraw stimulus with 15 million Americans unemployed, even as economic growth outpaces analysts’ forecasts. Slack labor markets have pushed inflation lower, allowing the Fed to keep its zero interest-rate policy in place to encourage businesses and households to borrow and spend.
The central bank will likely reintroduce quantitative easing measures because the other stops are already pulled, according to Rosenberg.
“The Fed will be expanding its balance sheet even further,” he said.
More…


Moody's Warns Greek Crisis Could Spread to UK


The Laughable Nature of GDP Growth (The Mogambo Guru)


Threats of Civil War


UK Bond Traders Poised for Election-Night Selloff


In a recent issue of his excellent (and free) Outside The Box e-newsletter, John Mauldin had these comments: "It now looks like almost 30% of the Greek financing will come from the IMF, rather than just a small portion. And since 40% of the IMF is funded by US taxpayers, and that debt will be junior to current bond holders (if the rumors are true) I can't tell you how outraged that makes me. What that means is that US (and Canadian and British, etc.) tax payers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks and funds reduce their exposure to Greece while tax-payers all over the world who fund the IMF assume that risk."

Inflation and Bailouts Go Hand in Hand Posted: May 05 2010 By: Greg Hunter Post Edited: May 5, 2010 at 2:17 pm
Filed under: Greg Hunter
Dear CIGAs,
Pick a financial fire and you can be sure the U.S. government will hose it down with gallons of money. AIG, General Motors, Chrysler, insolvent states, FDIC, Fannie, Freddie and all the banks are just a few of the blazes Uncle Sam has sprayed money on.
Now, the Federal Reserve is printing up another $105 billion to send to Greece to help with its debt problem. Is the bailout cycle getting ready to take another turn bailing out the Banks? You know, the ones we were told had little exposure to sour European debt? Check out this article from Bloomberg last week: JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy,Ireland, Greece and Spain, according to Wells Fargo & Co. JPMorgan’s exposure to the five so-called PIIGS countries is $36.3 billion, equating to 28 percent of the firm’s Tier-1 capital, a measure of financial strength, Wells Fargo analysts including Matthew Burnell wrote today. Morgan Stanley holds $32.4 billion of debt in the region, which equates to 69 percent of its Tier 1 capital, Burnell wrote.”
I guess now we know why Ben Bernanke is supplying Greece with $105 billion in bailout money. It looks like he actually is bailing out U.S. Banks—again! I wrote about the Fed admitting to massive money creation 3 weeks ago in a post called “Bernanke Admits Printing $1.3 Trillion Out Of Thin Air.” It also looks like we are not going to stop this money printing train wreck because the bailouts seem to be never ending. This is the main reason we are facing a head-on collision with very big inflation.
In the latest report from John Williams of shadowstats.com, the inflation picture looks dire and definite. Williams wrote, “My outlook for a hyperinflationary great depression in theUnited States is unchanged; all that is unfolding now is some of the detail that should lead to that ultimate financial/economic disaster. Gold remains the best long-term hedge here, along with some silver, and cash outside the U.S. dollar and theUnited States. I still like the Canadian and Australian dollars and the Swiss franc. Again, the outlook is for the long haul, irrespective of any near-term extreme volatility in the various markets. As to the U.S. stock market, the term “insanity” comes to mind as I watch some of the day-to-day movements.”
Williams also thinks there are “mounting systemic risks.” On that issue, the Global Europe Anticipation Bulletin is in agreement with shadowstats.com. GEAB writes, “The fuss made over Greece by the English and US media in particular tried to hide from the majority of the economic, financial and political players the fact that the Greek problem wasn’t a sign of an upcoming Eurozone crisis (2) but, in fact, an early warning of the next big shock of the global systemic crisis. . . one mustn’t forget that the current crisis has its origin in the collapse of the world order created after 1945, of which the United States was the support, assisted by the United Kingdom.” (Click here for the complete GEAB report.)
I keep trying to find ways to explain the scope of what is going on in the world financial markets to friends and readers of this site. I told an acquaintance at dinner last night the money printing going on “has never happened on this scale in human history.” The guy just looked at me and said that he thought it was a good idea to invest in municipal bonds! How are broke cities and states going to pay the interest, let alone the principal, back. If the cities and states are bailed out, massive inflation will render the bonds worthless or near worthless.
People just do not understand the calamity that is upon us, but what do you expect when the mainstream media keeps broadcasting that we are in a “recovery.” I do not know exactly how this is going to end, but for the unprepared, it will end badly.
More…


In The News Today Posted: May 05 2010 By: Jim Sinclair Post Edited: May 5, 2010 at 2:23 pm
Filed under: In The News
Jim Sinclair’s Commentary
The demand for gold only increases worldwide as currency after currency falls.
Before 8am in my most recent travels through Dubai I could see very long lines of clients waiting at a very long counter of gold bullion seller stores.
Forget the silly article many of you asked about that said if there were no problems gold would be lower. Duh! That writer is clearly a brain surgeon.
Commercial banks buy gold to meet demands Dealers claim regional banks are stockpiling gold for clients who want their deposits saved in the yellow metal. By Shahsank Shekhar Published Wednesday, May 05, 2010
Commercial banks are buying gold to meet the demand of clients who want their deposits saved in gold, commodity dealers said.
With the currencies in the GCC pegged to the volatile US dollar, local banks have all the more reasons to buy gold, local gold dealers emphasised.
On the other hand, senior Dubai-based bankers affirmed they have been considering meeting the demands of their customers to back the deposits with gold.
The dealers, however, declined to name the banks they have been supplying gold to.
Michael Mesaric, CEO of Valcambi Sa, one of the largest gold refiners in the world, said last year the company supplied 150 tonnes of gold to banks in Switzerland. He said the commercial banks in GCC are buying gold, as well.
"Everyone is buying gold. Customers are demanding that their deposits be kept in gold," Mesaric told Emirates Business on the sidelines of the ‘7th Dubai City of Gold Conference’.
A Dubai-based banker said that banks have been open to the idea of buying gold. "We may not disclose our holdings in gold, but then the bullion is an important proposition for us. Especially with regards to holding the confidence of customers," he said.
More…



Hourly Action In Gold From Trader Dan Posted: May 05 2010 By: Dan Norcini Post Edited: May 5, 2010 at 4:23 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
There was continued pressure on equities overnight and into today’s session as fears spread that the situation in Greece is going to spread further into the Euro Zone. Portugal, Spain, and Italy are now the prime candidates. Some are going as far as saying that the Euro zone is going to break up. Such thinking will bring safe haven buying into gold especially in Europe which is exactly what we saw. Gold in euro terms remains very strong coming in at the PM fix above the 906 level. Clearly, investors on the Continent are very worried about the health of the Euro and are buying large amounts of gold. This safe haven buying is also going to continue to support Dollar priced gold which is why the gold bears at the Comex cannot crack the market lower as they have done in the past even as the entirety of the commodity sector is getting sold off by hedge funds and the US Dollar is floating ever higher.
About mid-morning the US equity markets staged a bit of a recovery upwards which brought about a round of short covering as well as some fresh buying in the commodity sector. That allowed gold, which had already begun coming off its worst levels and moving back towards unchanged to come firmly into the plus column.
Open interest readings indicate that fresh shorts were put on in gold yesterday. Today some of those are getting squeezed out almost immediately as they are underwater. I find that quite astonishing because you have to ask who in their right mind would be so eager to establish fresh shorts in gold when it is making all time highs or very new all time highs in terms of the European currencies. At a time when fear of currency stability is foremost in traders/investors’ minds, who is so anxious to sell the safest haven of all? The answer to the question is its own explanation because no one “in their right mind” would do so. Yes, there is the computer algorithm reflex selling occurring but that alone is insufficient to explain the rise in open interest for the total would have fallen were it only long liquidation that was occurring. There are clearly sellers present whose intent is to discredit gold in times of crisis as a reliable safe haven. They will fail.
Please see the chart for the technical support and resistance levels.
The rebound in the equities also brought the Dollar down somewhat off its best levels of the day as some traders decided to step back and evaluate where the wild action of the last two days has taken things. That pause in the Forex arena did not last long however as fresh sellers of the Euro emerged after lunch and crushed it lower once again. The ECB is going to regret getting their wish for a weaker Euro responding to complaints from exporters on the Continent. Currency events can quickly get out of hand to the point where they threaten the very stability of a nation. In this case we might even see some half-hearted attempt by the ECB to intervene to attempt to slow the decline in the Euro and prevent a collapse. Such an event might not be that far off if the selling accelerates. The alternative to doing nothing is that remaining confidence in the currency begins to erode further which engenders a vicious wave of unstoppable selling. By then, only drastic measures can save the unit but at the cost of wrecking the entire economy.
The flip side to all of the Euro’s woes is that the Dollar has broken out to the upside on the technical charts as the weekly now shows that there is little between it and a run towards 86.60 – 87. Once again, the Dollar is not moving higher due to any inherent strength in its fundamentals but merely because it is not the Euro. Markets are funny things – they can willingly choose to overlook many things at times and seemingly become tunnel vision oriented but there is one certainty in the marketplace that no amount of self imposed ignorance can change – that is the fact that the US government is continuing to issue trillions of the little things out of thin air and that the problems many of the individual US states are facing are every bit as severe as Greece’s or Spain for that matter. For now, and I wish to emphasis, the “for now” bit, the Dollar is the safe haven currency of choice along with the Yen to some extent although that currency draws its strength not because of anything related to the Japanese economy but because the majority of Japanese government debt is held by its own citizens allowing them to perhaps weather a credit crisis much better than others who are not as wedded to it as the average Japanese citizen is to theirs.
The HUI closed fairly well yesterday all things considered and seemed to separate itself somewhat from the selling frenzy as that session came to a close. Today, it was back down once again as early morning weakness in the global equity markets pulled the shares lower but it too managed to work higher and come into the plus column around mid-morning. When the equities got hit by another barrage of selling in the afternoon, the HUI surrendered its gains and moved back into the negative column. So far it is managing to bounce off the rising 20 day moving average but it needs to close above 460 again to firmly turn the tide back in favor of the bulls. The bears will try to force it down below the 444 level on a close if they are to gain the advantage.
Crude oil could not hold the $80 level (motorists, airlines and trucking industry folks are all celebrating its failure do so so) although the bulls are certainly trying to get it back over that line. Technically if it cannot recapture $80.50 and soon, it will have turned the daily chart decidedly negative and engender a sell the rally mentality unless or until it can close over $84.
Bonds continue to be the recipient of safe haven flows although they have come well off their best levels at this point in the session. They keep easily reaching the upside resistance levels I have mentioned in my recent comments with relative ease although today’s fade from the best print might be signaling that some guys want no part of them at current yields. Personally I wouldn’t want any part of them at current yields seeing that the government is busier than a one-legged man in a butt kicking contest manufacturing more of them out of thin air.
Let’s see if the stock market can manage a move well up off the lows going into the closing bell. If it does not get itself above the 50 day moving average, equity bulls are going to find themselves in serious trouble technically. If it does, bulls will be cackling that a bottom has been found and the market can now begin to consolidate before making another leg higher.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini







CMBS Delinquencies Hit Fresh Record, Now at $51 Billion, 268% Increase.


Still No Credit Where It's Due (Commercial and industrial loans have contracted 19% in the past 12 months. Consumer credit is down 6% in the year to February, when it stood at the same level as June 2007.)


article in Der Spiegel: The Mother of All Bubbles Could Push Euro Zone into Bankruptcy.


China May ‘Crash’ in Next 9 to 12 Months, Faber Says


Greece's Costs Seen Exceeding EU-IMF Help


Trickle of Nonsense (The Mogambo Guru)


Frugality Among Consumers Outliving Recession. (Could it be, because people realize that the "recovery" is a fraud?)


Government Debt Explosion Hits Turning Point


Stocks Extend Decline On European Debt Worries


Gold Hits 5-Month High on Greek Aid Uncertainty


No Guarantees at the Pension Benefit Guaranty Corporation



Jim's Quote of the Day:
Permalink
"As the dollar breaks down, you’ll also likely see disruptions in supply chains, including shipments of food to grocery stores. People should consider maintaining stockpiles of basic goods needed for living, much as they would for a natural disaster. I sit on the Hayward fault in California. I have a supply of goods and basic necessities in case something terrible happens—natural or man-made—that will carry me for a couple of months. It may take that long for a barter system to evolve, which I think is what you’re going to end up with; at least until a new currency system is reorganized and you get a government that’s able to bring its fiscal house into order. No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed."
- John Williams of ShadowStats, by way of Jim Sinclair's JSMineset web site

Trader Dan Comments On The Nationalizing Of 401(k)s Posted: May 04 2010 By: Dan Norcini Post Edited: May 4, 2010 at 8:03 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
I have heard rumblings about this for more than a year but up until now, did not pay those rumors much attention as in this day and age, there are all manner of things floating around in cyberspace.
However, the fact that this is now drawing Congressional Republican interest plus a formal response, tells me that there might actually be some fire behind this smoke. I cannot think of anything that the socialist-leaning politicians who now are in control of this country might attempt that would create more havoc, stir up more anger and set this nation on a course of internal dissension than this ill-conceived plot.
What is behind this is twofold – first – the Administration and its allies in the Congress have so deeply entrenched this nation into perpetual indebtedness, that the country will be forced to issue almost numberless Treasuries in order to finance this unprecedented spending spree. Any move towards “guaranteeing” a return on retirement would necessarily have to include Treasuries, which are the only investment vehicle that I am aware of that can “guarantee” a return. Such a move would require that equities be sold off and the funds from the sale be invested into Treasury debt. In effect, the government would create a brand new source of demand for the vile IOU slips that they are creating by the trillions.
Secondly, there is also no doubt that politicians looking to buy votes are salivating over the prospects of those billions of dollars of funds “just sitting out there” in retirement accounts. They could then spend that money on more government goodies.
What is particularly galling is that the same government whose voracious appetite for spending money that they do not have and thus has forced the unlimited printing of Dollars to finance the same, is now supposed to rescue us all from the ravages of the very inflation that they themselves are responsible for creating. And they wonder why the public is so angry?
Should this Administration even seriously propose anything remotely resembling this, we would see a selloff in the equity markets that would rock this nation to its core. Imagine the selling involved with the government forcing private citizens to exchange equities for the “safety of Treasuries”. It would be pushed to the public as a means to help the poor and “unsophisticated investor” avoid the loss of their retirement savings with Big Brother guaranteeing them an income in their old age.
I do not want to unnecessarily alarm anyone but the fact that this is now even being discussed is reason enough for concern among investors who should continue to monitor any development along these lines. I am still awestruck that such talk has now come out into the open. Perhaps we are seeing a trial balloon of sorts.

Here is the entirety of the House GOP Savings Recovery Group letter outlining the issue that was sent last night to the Labor and Treasury Secretaries:

The Honorable Hilda L. Solis Secretary U.S. Department of Labor 200 Constitution Avenue, NW Washington, DC 20210

The Honorable Timothy Geithner Secretary U.S. Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, DC 20210

Dear Secretaries Solis and Geithner:
As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.
In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” — presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”
The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary — again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.
In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.
Similarly, and more recently, the Departments of Labor and Treasury have jointly issued a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options.” While we appreciate the Departments’ seeking guidance and information from all parties and stakeholders in advance of regulatory activity, we strongly urge that the Departments not proceed with any regulation in this area before they have carefully and thoroughly considered all of the information received.
More specifically, we urge that the Departments take no action to mandate that plan sponsors — often, small businesses — include a “lifetime income” or “annuitization” option if they choose to offer a 401(k) plan to their employees, or that beneficiaries take some or all of their retirement savings in such an option. Data shows that 70 percent of Americans oppose the concept of a mandated annuity or government payout of their 401(k) plan. On a more fundamental level, Congress should not be in the business of choosing “winners” and “losers” among retirement security stakeholders. Instead, we urge the Departments to make it easier for employers to include retirement income solutions in their savings plans and to help workers learn more about the value of their retirement savings as a source of retirement income. Finally, to the extent new mandates and bureaucratic red tape from Washington push small employers out of the business of offering these plans to their employees, we would submit such an effort weakens, rather than strengthens retirement security.
We appreciate your consideration of our views in these important matters and stand ready to work with you and the Administration to promote secure and adequate retirement savings for all Americans.
Sincerely,
House Republican Leader John Boehner (R-OH)
Rep. John Kline (R-MN)
Rep. Dave Camp (R-MI)
Rep. Sam Johnson (R-TX)
Rep. Dean Heller (R-NV)
Rep. Brett Guthrie (R-KY)
Rep. Michele Bachmann (R-MN)
Rep. Pat Tiberi (R-OH)
Rep. Bob Latta (R-OH)
Rep. Erik Paulsen (R-MN)
Rep. Lynn Jenkins (R-KS)
Rep. Ed Royce (R-CA)
Rep. Buck McKeon (R-CA)

Link to letter…



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Quote of the day

"Sir:As a foreign reader of this blog (Australian) I keep a very close eye on the U.S. politics. I find myself envious of a country that has a Bill Of Rights such as yours. I carry great admiration for those that defend it, but at the same time it depresses me that so many Americans take it for granted.In Australia, Federal authority is so pervasive that the only thing the our states provide is an excuse to employ another tier of overpaid under-worked public servants.Yet regardless of how tight a government's stranglehold on their populace may be (here and abroad), no government lasts forever. If you survive the crash, and if community is restored then you might just find yourself in a position of leadership. For this reason, regardless of the fact that you may not live in the U.S. of A., there is every reason to make a hard copy of the U.S. Constitution and take the time to understand its value (at least in ernest). Particularly the Bill Of Rights!History has spawned a thousand tyrants but it only took the courage of one nation and the spiritual nobility of a handful of founders to show the way forward for all mankind, and all you have to do to benefit from their wisdom and sacrifice is print out their legacy.After all, if you're going to rebuild, then you may as well start with the framework to do it right."

As always, thank you for the invaluable service you provide here. Kindest regards, -
The Austeyralian

John Williams: A Hyper-Inflationary Great Depression Is Coming Posted: May 04 2010 By: John Williams Post Edited: May 4, 2010 at 4:32 pm
Filed under: ShadowStats.com
Courtesy of The Gold Report (http://www.theaureport.com/)

ShadowStats’ John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is in a depression and why a "Hyper-Inflationary Great Depression" is now unavoidable. John also shares why he selects gold as a metal for asset conversion in this exclusive interview with The Gold Report.

The Gold Report: John, last December you stated, "The U.S. economic and systemic crisis of the past of the past two years are just precursors to a great collapse," or what you call a "hyper-inflationary great depression." Is this prediction unique to the U.S., or do you feel that other economies face the same fate?

John Williams: The hyper-inflationary portion largely will be unique to the U.S. If the U.S. falls into a great depression, there’s no way the rest of the world cannot have some negative economic impact.

TGR: How will the United States’ decreased economic power impact global economies? Will the rest of the world survive?

JW: People will find to their happy surprise that they’ll be able to survive. Most businesses are pretty creative. The thing is, the U.S. economic activity accounts for roughly half that of the globe. There’s no way that the U.S. economy can turn down severely without there being an equivalent, at least a parallel downturn outside the U.S. with its major trading partners.
When I talk about a great depression in the United States, it is coincident with a hyper-inflation. We’re already in the deepest and longest economic contraction seen since the Great Depression. If you look at the timing as set by the National Bureau of Economic Research, which is the arbiter of U.S. recessions, as to whether or not we have one, they’ve refused to call an end to this one, so far. But assuming you called an end to it back in the middle of 2009, it would still be the longest recession seen since the first down-leg of the Great Depression.
In terms of depth, year-to-year decline in the gross domestic product, or GDP, as reported in the third quarter of 2009, was the steepest annual decline ever reported in that series, which goes back to the late ’40s on a quarterly basis. Other than for the shutdown of war production at the end of World War II, which usually is not counted as a normal business cycle, the full annual decline in 2009 GDP was the deepest since the Great Depression. There’s strong evidence that we’re going to see an intensified downturn ahead, but it won’t become a great depression until a hyper-inflation kicks in. That is because hyper-inflation will be very disruptive to the normal flow of commerce and will take you to really low levels of activity that we haven’t seen probably in the history of the Republic.
Let me define what I mean by depression and great depression, because there’s no formal definition out there that matches the common expectation. Before World War II, economic downturns commonly were referred to as depressions. If you drew a graph of the level of activity in a depression over time, it would show a dip in the economy, and you’d go down and then up. The down part was referred to as recession and the up part as recovery. The Great Depression was one that was so severe that in the post-World War II era, those looking at economic cycles tried to come up with a euphemism for "depression." They didn’t want to create the image of or remind people of the 1930s. Basically, they called economic downturns recessions, and most people think of a depression now as a severe recession.
I’ve talked with people in the Bureau of Economic Analysis and the National Bureau of Economic Research in terms of developing a formal depression definition. The traditional definition of recession—that of two consecutive quarters of inflation-adjusted contraction in GDP—still is a solid one, despite recent refinements. Although there’s no official consensus on this, generally, a depression would be considered a recession where peak-to-trough contraction in the economy was more than 10%; a great depression would be a recession where the peak-to-trough contraction was more than 25%.
We’re borderline depression in terms of where we’re going to be here before I think the hyper-inflation kicks in. You’ve certainly seen depression-like numbers in things such as retail sales, industrial production and new orders for durable goods, where you’re down more than 10% from peak-to-trough. In terms of housing, you’re down more than 75%, and that certainly would be in the great depression category. With hyper-inflation, you have disruption to the normal flow of commerce and that will slow things down very remarkably from where we are now.

TGR: After a period of recession, isn’t inflation considered a good sign?

JW: There are a couple of things that drive inflation. The one that you’re describing is the relatively happy event where strong economic demand is exceeding production, and that’s pushing prices higher, as well as interest rates. That’s a relatively healthy circumstance. You can also have inflation, which is driven by factors other than strong economic activity. That’s what we’ve been seeing in the last couple of years. It’s been largely dominated by swings in oil prices. That hasn’t been due really to oil demand, as much as it has been due to the value of the U.S. dollar. Oil is denominated in U.S. dollars. Big swings in the U.S. dollar get reflected in oil pricing. If the dollar weakens, oil rises. That’s what you saw if you go back to the 1973-1975 recession, for example. That was an inflationary recession.
Indeed, the counterpart to what you were suggesting earlier about the strong demand and higher inflation is that usually in a recession you see low inflation. The ‘73 to ‘75 experience, however, was an inflationary recession because of the problem with oil prices. That’s what we were seeing early in this cycle, where a weakening dollar rallied oil prices, and then the dollar reversed sharply and oil prices collapsed. We have passed through a brief period of shallow year-to-year deflation in the consumer price index, but, as oil prices bottomed out and headed higher since the end of 2009, we’re now seeing higher inflation, again.
I’m looking at hyper-inflation, which is a rather drastic forecast. This has been in place as an ultimate fate for the system for a number of years. Back in the ’70s, the then Big 10 accounting firms got together and approached the government and said, "Hey guys, you know you need to keep your books the way a big corporation does. You’re the largest financial operator on earth." The government then, as well as today, operates on a cash basis with no accrual accounting and such. Yet, over a period of 30 years, the accountants and government put together generally accepted accounting principles, or GAAP, accounting for the federal government and introduced formal financial statements on that basis in 2002, which supplement the annual cash-based accounting.
If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you’ll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can’t raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit. With no political will to contain the spending, eventually the government meets its obligations by revving up the currency printing press.

TGR: With all this new paper money coming into the system, wouldn’t we see a bigger bubble than we’ve ever seen prior to a hyper-inflationary great depression?

JW: No, in fact, it’s a very unusual circumstance that we have now. Put yourself in Mr. Bernanke’s situation—he had to prevent a collapse of the banking system. He was afraid of a severe deflation as was seen in the Great Depression, when a lot of banks went out of business. The depositors lost funds and the money supply just collapsed. He wanted to prevent a collapse of the money supply and keep the depository institutions afloat. Generally, that has happened. The FDIC expanded its coverage and everything that had to be done to keep the system from imploding was done. The effects eventually will be inflationary.
In the process, what Mr. Bernanke did was to expand the monetary base extraordinarily, more than doubling it over a period of a year. The monetary base is money currently in circulation plus bank reserves. If you go back to before September 2008, the bank reserves were in the $50 to $60 billion range. Where the currency was maybe $800 billion, we’ve gone over $2 trillion in total reserves. Most of that is in excess reserves and not required reserves that banks have to keep to support their deposits. Normally banks would take their excess reserves and lend them out into the regular stream of commerce, and in doing so, that would create money supply. Instead they’re leaving the excess reserves on deposit with the Fed. Money supply and credit are now generally contracting. We’re going to see an intensified downturn in the near future. I specialize in looking at leading indicators that have very successful track records in terms of predicting economic or financial turns. One such indicator is the broad money supply.
Whenever the broad money supply–adjusted for inflation–has turned negative year over year, the economy has gone into recession, or if it already was in a recession, the downturn intensified. It’s happened four times before now, in modern reporting. You saw it in the terrible downturn of ‘73 to ‘75, the early ’80s and again in the early ’90s. In December of 2009, annual growth in real M3 turned negative. It’s now at a record low in terms of decline, down more than 6% year over year. What that suggests is that in the immediate future you’re going to see renewed downturn in economic activity.
In all the prior instances that I mentioned, this event led recessions, except for ‘73 to ‘75. That’s when you had the oil spike and a recession that came from that. When the money supply turned down in that recession, the economy accelerated in its decline. We’re going to see something along those lines, now, with about a six-month lead time. You’re going to have negative economic growth this year. The implications for that are extraordinary, because the projections on the federal budget deficit, a number of the state deficits, and the solvency and stress tests for the banking system all were structured assuming positive economic growth in the 2% to 3% range for 2010. Instead it’s going to be negative. Many states are going to be in greater difficulty than they thought. Most likely, you’re going to have federal bailouts there. The banks are going to have more troubles. All this means more government support, more government spending, greater deficits and greater funding needs for the U.S. Treasury. We have a global market that already is increasingly reluctant to hold the dollars and U.S. Treasuries.

TGR: The U.S. dollar is still the reserve currency, and it’s holding its value while the euro struggles. Wouldn’t decoupling precede hyper-inflation?

JW: I don’t know if it will decouple from being the reserve currency formally, but it will de facto. The reserve status is the reason the dollar didn’t collapse per se a year and a half ago during the September ‘08 panic. The movement is already afoot, however, to try to relegate the dollar to some status other than a reserve currency. For example, OPEC purportedly is looking to price oil in something other than U.S. dollars. The pressure is there to change the status.
Again, if you start to see a great depreciation of the U.S. currency or a tremendous increase in lack of confidence in the soundness of the government’s fiscal condition, there is a problem. You mentioned Greece, for example. The sovereign solvency issues there are minuscule compared to what we have with the United States, which is the elephant in the bathtub. The markets know it’s there. The central bankers know it’s there. Again, with the downturn in the economy, all the issues are going to be brought to a head. As they come to a head, there will be that effort to dump the dollar. I would expect that, indeed, it will be decoupled from its reserve status, although it could follow after the fact as opposed to before the fact.

TGR: Major economic indicators suggest significant improvement; even the IMF has stated that we’ve averted a global depression. What are you seeing that these governing bodies are not?

JW: What I’m using is a leading indicator of economic activity: year-to-year change in inflation-adjusted broad money supply. We’re now seeing a very sharp year-over-year decline, which has not been seen since the 1990 recession. This indicator does not work always in the upside; it doesn’t necessarily give you a signal for a rising economy. It is, however, basic. If you strangle liquidity you can always contract an economy. Deliberately or not, liquidity’s being strangled. You’re seeing very sharp declines in consumer credit, commercial and industrial loans and commercial paper outstanding.
You are getting happy news from governments, central banks, financial markets, Wall Street analysts and the popular media, which does tend to cater to Wall Street. Such is standard practice. Happy news is what sells and you don’t want to discourage people. The Obama administration, interestingly, started talking-down the economy when it wanted to get its stimulus package in place. As soon as that was done, it started talking-up the economy. Everything was just fine and dandy again. This is the most extraordinary downturn most people living today have ever seen. In terms of modern economic reporting, which basically started after World War II, we’ve never had a downturn as long or as severe. Perversely, the extreme nature of the downturn actually has warped recent reporting of seasonally-adjusted data to the upside.

TGR: Earlier you mentioned that business around the world will survive in the event of a depression. Aren’t there sustainable businesses in the U.S. as well? Won’t an influx of printed currency and green-tech job creation offer some value? At some point, doesn’t stimulus money become real cash producing real goods? Surely the economy would be viable at some level?

JW: Not without income growth. There’s nothing there that you’ve described to me that is growing, aside from inflation. To have sustainable growth in the economy, you have to income growth, net of inflation. That is not happening, and there is nothing in existing government stimulus that will cause real income growth.
Beyond income issues, the problem with the hyper-inflation is that very quickly the use of cash will cease. Let me contrast our circumstance here with a very popularly followed hyper-inflation case that’s now run its course in Zimbabwe. There you had probably the worst hyper-inflation that anyone’s ever seen. After devaluation upon devaluation, they successively lopped the zeros off the bills. If you took a $2 bill that they first issued back in the ’80s and then tried to come up with the equivalent of a $2 bill in the last form of the currency, it would be very difficult to do because it was so worthless. If you put a pile of those together to equal the original $2 bill, it would actually stretch from the earth to the Andromeda Galaxy. We’re talking light years. There are not enough trees on earth to print them. Yet the Zimbabwe economy survived and functioned. They had a lot of problems, but they operated. The reason they functioned was because they had a back-up system, which was a black market in U.S. dollars. People switched out of the Zimbabwe dollar to U.S. dollars. They could live with that. In the U.S., we don’t have a back-up system.

TGR: You mentioned in a recent interview with CNN that you’re recommending individuals move into both cash and gold. With the euro and the dollar in jeopardy, where does that leave us?

JW: I don’t like the euro. I don’t think that’s going to hold together, and I’ve thought so for some time. If it should break up and you have a new German currency, a new mark or something like that might be a strong one option. At the moment I like the Canadian dollar, the Australian dollar and the Swiss franc. For anyone living in the United States, rather than looking at the short-term volatility in the markets and trying to make money off of that, this is the time to batten down the hatches and to look to preserve your wealth and assets.
In terms of preserving the purchasing power of your assets, the best thing I can think of is physical gold. That’s worked over the millennia. I’m not per se a gold bug. It just happens to be a circumstance in which it’s the cleanest asset around for that. You don’t need to put all your assets into gold, but hold some. Hold some silver. I’d look to get some assets out of the U.S. dollar and look to get some assets out of the U.S. When I say outside of the U.S. dollar, again, I look at the Canadian dollar, Australian dollar, Swiss franc in particular. I think they will tend to do particularly well, whereas the U.S. dollar is going to become effectively worthless.
As the dollar breaks down, you’ll also likely see disruptions in supply chains, including shipments of food to grocery stores. People should consider maintaining stockpiles of basic goods needed for living, much as they would for a natural disaster. I sit on the Hayward fault in California. I have a supply of goods and basic necessities in case something terrible happens—natural or man-made—that will carry me for a couple of months. It may take that long for a barter system to evolve, which I think is what you’re going to end up with; at least until a new currency system is reorganized and you get a government that’s able to bring its fiscal house into order. No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed.
On a global basis, where the dollar is the world’s reserve currency, 80% of currency transactions involve the U.S. dollar. There’s going to have to be an overhaul of the global currency system. To gain credibility with the public, the powers that be likely will design a system that has some kind of a tie to gold, but that’s purely speculative.

TGR: From a personal investment point of view, you emphasized that this is a time to conserve assets, including gold and other currencies. How else can investors protect themselves?

JW: I like physical gold and silver. I look to gold as a primary hedge. If you can come out of this holding gold, you’ll be in a position where you’ll be able to take advantage of some extraordinary investment opportunities that will follow. With inflation, real estate is usually a pretty good bet. It tends to hold its value over time. There may be periods of illiquidity, though, and it’s not portable. Neither of those limitations is an issue with gold. Maybe gold will become the black market to support U.S. economic activity. It certainly would be the area that people will try to transfer their assets to as time goes along.
You see people now as gold gets to a new high saying, "Oh my goodness, I bought at $200, and I can sell out at $1,100 making a good profit." What people don’t realize is that they haven’t made a real profit. What they’ve done is retained the purchasing power of the dollars that they invested in gold, and they’ve lost proportionately the purchasing power of the amounts left in dollar-denominated paper assets over the same time. Gold is a long-term wealth preserver. Again, where many people are used to an investment environment where they can buy a stock, make a quick profit and then sell, with gold you need to hold on for the long haul as an insurance policy, not as a quick investment.

TGR: Thank you very much for your time.

Walter J. "John" Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies. For more than 25 years he has been a private consulting economist and a specialist in government economic reporting. His analysis and commentary have been featured widely in the popular media both in the U.S. and globally. Mr. Williams provides insight and analysis on his website, http://www.shadowstats.com/.


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Important Notes On Friday’s Bank Failures Posted: May 03 2010 By: Jim Sinclair Post Edited: May 3, 2010 at 12:26 am
Filed under: General Editorial
My Dear Friends,
Please read this as you must understand the serious nature of what is taking place.
Regards, Jim

Dear Jim,
The following are some additional thoughts on the seven bank failures announced by the FDIC on Friday, April 30, 2010.
1. Perspective on Losses
This week’s losses were extremely serious, a fact belied by the virtual absence of press coverage. They were the largest in any single week since the failure of IndyMac Bank on July 11, 2008.
IndyMac had assets of about $32 billion and deposits of $19 billion. Its failure cost the FDIC an estimated $8 billion.
The seven banks that failed this week had combined assets of about $25.8 billion and deposits of $19.6 billion. These failures cost the FDIC an estimated $7.33 billion.
Prior to this week, the FDIC’s estimated losses from 57 bank failures in 2010 stood at about $8.6 billion. This week’s failures practically doubled that figure, to $15.93 billion.
This information cannot be reconciled with the MOPE that states the banking sector has recovered. To the contrary, these failures speak of deeply-rooted problems in the banking sector that appear to be getting worse over time.
2. Status of the Deposit Insurance Fund
According to an AP article posted Friday (cited below), the FDIC’s deposit insurance fund “fell into the red last year, hitting a $20.9 billion deficit as of [Dec. 31, 2009].” With this year’s losses, the fund’s deficit has grown to at least $36.8 billion. In addition, the FDIC has a huge exposure for worse-than-expected losses on some $165 billion of assets taken over by acquiring banks.
That pretty much wipes out the $45 billion the FDIC announced it was going to raise by requiring banks to pre-pay premiums for the period, 2010 through 2012. Obligations of the FDIC will soon become obligations of the U.S. taxpayer, adding billions of dollars each year to already out-of-control federal deficits.
3. More FASB-Blessed Fantasy Valuations
Each of the FDIC’s press releases provides vital information about the true market value of the failed banks’ assets versus the values assigned them by bank management. This gives some insight into the extent of over-valuations across the banking sector in the wake of the Financial Accounting Standards Board (“FASB”) having suspended fair value accounting rules last year.
The FASB’s capitulation has given bank management far too much leeway to value assets at levels far beyond what they could fetch in the open market, resulting in banks’ balance sheets becoming increasingly less reliable indicators of their true financial health.
Looking at the five largest failures this week:
Westernbank Puerto Rico of Mayaguez, Puerto Rico, had stated assets of $11.94 billion and deposits of $8.62 billion. On paper, it was an extremely healthy bank; yet the FDIC’s loss estimate for its closure is $3.31 billion. Based on that estimate, the real market value of its assets is only $5.31 billion. Bank management had over-valued these assets by 125%.
R-G Premier Bank of Puerto Rico of Hato Rey, Puerto Rico, had stated assets of $5.92 billion and deposits of $4.25 billion. The FDIC’s loss estimate for its closure is $1.23 billion. Based on that estimate, the real market value of its assets is $3.02 billion, and had been over-valued by 96%.
Frontier Bank of Everett, WA, had stated assets of $3.5 billion and deposits of $3.13 billion. Its loss estimate is $1.37 billion. Based on that estimate, its assets are really worth $1.76 billion, and had been over-valued by 99%.
Eurobank of San Juan, Puerto Rico had stated assets of $2.56 billion and deposits of $1.97 billion. Its loss estimate is $744 million. Based on that estimate, its assets are really worth $1.226 billion, and had been over-valued by 109%.
CF Bankcorp of Port Huron, MI, had stated assets of $1.65 billion and deposits of $1.43 billion. Its loss estimate is $615 million. Based on that estimate, its assets are really worth $815 million, and had been over-valued by 102%.
Here again, these bank failures are being reported free of any allegations of fraud or even negligence on the part of bank management. Absent any such allegations, it stands to reason that these over-valuations, ranging from 96% to 125%, are considered to be in line with reasonable accounting practices sanctioned by the FASB at the time it suspended fair value requirements.
4. AP Article Covering Failures
Linked below is an AP article that provided some better-than-average coverage of this week’s failures and the status of the FDIC’s finances. Interestingly, the article was originally published at about 8:15 pm EST on Friday, April 30, 2010, but had to be re-posted at 10:00 pm EST following the FDIC’s release of additional information late in the evening.
Focusing on the three banks that failed in Puerto Rico, the AP noted they “together held more than one-fifth of the total bank assets on the U.S. Caribbean territory.”
Here’s some food for thought. Puerto Rico’s GDP is about $76 billion, about 21% of the size of Greece’s ($356 billion). What is more relevant to the concerns of U.S. citizens, the fact that Greece is experiencing budget problems, or that FDIC-insured banks controlling one-fifth of the value of the assets on Puerto Rico failed in one week?
What possible explanation could there be for the fact that the Greek “crisis” has been dominating headlines in the U.S. press for months, while matters such as these horrendous bank failures and the impending failures of the majority of U.S. States barely get a mention?
Can you say, Manipulation of Perspective Economics?
Respectfully yours, CIGA Richard B.
Banks closed in Puerto Rico, Mich., Mo., Wash. Regulators shut down 7 banks in Puerto Rico, Mo., Mich., Wash., brings total to 64 this year Marcy Gordon, AP Business Writer, On Friday, April 30, 2010, 10:00 pm
WASHINGTON (AP) – Regulators on Friday shut down shut down three banks in Puerto Rico, two in Missouri, and one each in Michigan and Washington, bringing the number of U.S. bank failures this year to 64.
The Federal Deposit Insurance Corp. took over the banks: Westernbank Puerto Rico, based in Mayaguez, with about $11.9 billion in assets; R-G Premier Bank of Puerto Rico, based in Hato Rey, with around $5.9 billion in assets; and San Juan-based Eurobank, with $2.5 billion in assets.
The FDIC also seized CF Bancorp, based in Port Huron, Mich., with about $1.6 billion in assets; Champion Bank, of Creve Coeur, Mo., with $187.3 million in assets; BC National Banks, of Butler, Mo., with $67.2 million in assets; and Frontier Bank, based in Everett, Wash., with $3.5 billion in assets.
Banco Popular de Puerto Rico agreed to acquire Westernbank’s deposits and about $9.4 billion of its assets. The FDIC will keep the remainder for eventual sale. Scotiabank de Puerto Rico agreed to buy all the assets and deposits of R-G Premier Bank. And Oriental Bank and Trust is acquiring all the assets and deposits of Eurobank. The three healthier acquiring banks are based in San Juan, the Puerto Rican capital.
The three failed banks together held more than one-fifth of the total bank assets on the U.S. Caribbean territory. They had struggled to stay afloat during Puerto Rico’s grinding, four-year recession.
It was Puerto Rico’s largest bank consolidation in more than two decades as well as one of the FDIC’s biggest resolutions of failed banks in the financial crisis that struck in fall 2008.
More…
Now do you understand why I keep saying they will print money till we run out of trees?
They have no choice but to print, or the whole ponzi scheme falls apart...





All Western states, be that New York State or Greece, will be bailed out.
QE to infinity is omnipresent in the West.


Eurozone OKs $145 billion bailout for Greece
Loans, with aid of International Monetary Fund, spread across three years By Elena Becatoros and Raf Casert
BRUSSELS – Finance ministers from the 16 countries that use the euro agreed Sunday to rescue Greece with €110 billion in loans over three years to keep it from defaulting on its debts.
The loan package with the International Monetary Fund is also aimed at keeping Greece’s debt crisis from spreading to other financially weak countries such as Spain and Portugal — just as Europe is struggling out of a painful recession.
In return, Greece had to agree to an austerity program that will impose painful spending cuts and tax increases on its people for years to come.
The plan will still need approval by some countries’ parliaments. But the head of the eurogroup, Luxembourg’s Jean-Claude Juncker, said Greece will get the first funds by May 19, when Athens has €8.5 billion worth of a 10-year bond maturing.
Fears that the money might be held up by objections in powerful eurozone member Germany — where the Greek bailout is not popular — sent shudders through bond and stock markets last week.
Jim Sinclair
More…





OK FOLKS, READ THIS IT"S VERY IMPORTANT. IF YOU THINK EVERYTHING IS GETTING BETTER THINK AGAIN... Do not listen to the lies and propaganda from the mainstream media...
Next you will learn how the Ponzi scheme works.


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Jim’s Mailbox Posted: May 03 2010 By: Jim Sinclair Post Edited: May 3, 2010 at 12:21 pm
Filed under: Jim's Mailbox
Dear Jim,
The following two articles provide a beautiful illustration of quantitative easing in action. They also reveal the shaky, deceptive foundation of our present, so-called economic recovery.
To begin with, the Bloomberg article, “Banks Buying Treasuries Help Keep Borrowing Rates Low," demonstrates how the U.S. government is able to create billions of dollars out of whole cloth.

The Federal Reserve creates as many billions of dollars as it wants with the stroke of a key. Next, it loans those billions of dollars to U.S. Banks at a rate of close to zero percent interest. U.S. Banks then take the billions of dollars they have borrowed from the Federal Reserve and purchase U.S. Treasuries, earning a margin of three percent or more interest.
Banks understandably prefer earning money this way to making actual loans to U.S. businesses and individuals. As noted in the Bloomberg article, “The risk of owning Treasures is lower than creating loans.”
This is an out-and-out monetization of U.S. debt. The government could literally do this to infinity. The only thing holding it back would be coming up with the interest payments; however, those, too, could be monetized to infinity.
It also amounts to an enormous subsidy of the banking industry that was never authorized by the legislature. In exchange for nothing more than executing a couple of keystrokes, U.S. banks earn a margin of three percent or more interest on however much money the U.S. Treasury and the Federal Reserve see fit to create.
Next, as explained in the Wall Street Journal article, “U.S. Role in Mortgage Market Grows Even Larger,” we see that the U.S. government has been forced to take over the lending operations that U.S. banks now find undesirable. As a result, we learn that the U.S. government’s “share” of the U.S. mortgage market has grown to 96.5%.
With apologies to the Wall Street Journal’s headline, if a single player has 96.5% of the home loan market, it does not have a “role” in the home mortgage market, it is the home mortgage market. This ridiculous shell game is the single factor propping up home prices in this country.
To summarize: the U.S. government creates money out of thin air, pays banks to hold onto that money and takes over the risk-based lending functions the banks were set up to perform in the first place. It’s a scheme only a bureaucrat could conceive of, and only a deaf, dumb and blind public could allow.

Banks Buying Treasuries Help Keep Borrowing Rates Low (Update 1) By Cordell Eddings
May 3 (Bloomberg) — Bank are increasing purchases of U.S. government securities to pump up profits while lending to businesses languishes near the lowest levels since credit markets started to freeze almost three years ago.
Holdings of Treasuries rose each of the past five weeks, an increase of $63.2 billion to $1.5 trillion, according to Federal Reserve data. At the same time, commercial and industrial loans climbed less than 1 percent to $1.27 trillion and are down 23 percent from the record high level in October 2008.
Banks, facing increased regulation after posting $1.78 trillion of write-downs and losses since the start of 2007, are taking advantage of the record gap between their borrowing costs and yields on U.S. debt instead of lending, according to data compiled by Bloomberg. Bank demand for Treasuries is helping cap yields as President Barack Obama sells record amounts of bonds to finance a budget deficit that exceeds $1 trillion.
“The risk of owning Treasures is lower than creating loans,” said Anthony Crescenzi, market strategist and money manager at Newport Beach, California-based Pacific Investment Management Co., the world’s largest bond-fund manager. “There is no clarity on what the capital climates will be domestically or on a global scale with regulation coming down the pipes, which means banks will be banking their money in safer assets.”
More…

U.S. Role in Mortgage Market Grows Even Larger By Nick Timiraos, The Wall Street Journal, April 30, 2010, 7:46 P.M. ET
The U.S. government’s massive share of the nation’s mortgage market grew even larger during the first quarter.
Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants.
By providing a steady source of liquidity to the mortgage market, the government has helped housing markets to stabilize. However, "Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they’re getting bigger and bigger and bigger," said Paul Bossidy, chief executive of Clayton Holdings LLC, a mortgage analytics firm.
More…

If after reading this, you think everything is getting better... then forget about reading this website...because you are your own worst nightmare...

Why Investors Will Choose Gold and Silver





Governments lie; bankers lie; even auditors sometimes lie. Gold tells the truth. - Lord Rees Moog, former editor of The Times of London



We certainly live in interesting times. The European Union, European Central Bank... and the IMF are wringing their hands about the European contagion that will soon spread throughout the world. But here is nothing they can do about it. They are doomed whether they turn on the printing presses or not. It's death by deflation... or death by hyperinflation. Re-pricing gold... and a return to some sort of international gold standard... is the only viable solution left. Russia and China have got that figured out already. I'm sure that virtually every ounce their digging out of the ground these days is going straight into the vaults of their respective central banks. I hope, dear reader, that you've got that figured out, too.







Jim Sinclair of jsmineset.com sent us this missive this morning about the attack on currencies that is currently unfolding before our very eyes.


1. Bretton Woods was folded.

2. The floating exchange rate system is about to be folded.

3. By default or design we are going to a one-world currency and a one-world central bank of central banks.

4. For Portugal, Ireland, Italy, Greece or Spain to break off from the euro would be an expansion of the floating exchange rate system under present conditions.

5. There are presently 3 major currencies. That is the US dollar, the euro and gold.

6. The SDR was an attempt to form a single reserve currency that never took flight.

7. The SDR is an accounting unit made up of an index of currencies much like the USDX.



There is no immunity now from the size of funds seeking to speculate or manipulate markets. This type of money is attacking the debt of the weaker euro states by intention or coincidence. Their success in the Iceland situation was only the first chapter of a multi chapter play. Central bankers fear that this type of action, most certainly if it is as successful as it was on Iceland, succeeding against the weaker euro states could easily attack the present functional reserve currencies, the US dollar and the euro. There is an implicit fear that if the ECB refuses to or cannot sustain the debt of Portugal, Ireland, Italy, Greece and Spain the next to fall will be both the US dollar and the euro. The states of the US are no different, in form or short opportunity, than weak members of the euro. Already major money is short California, New York and Pennsylvania debt. A pounding of state debt is as easy as the pounding of the weaker members of the euro. Attack of a currency is primarily an attack of the debt representing that currency.

The "Oracle of Omaha" (Warren Buffet) himself now sounds the alarm that the shares of fiat empires are about to collapse. You were always years ahead of the curve for those who listened. We thank you for your service.
Remember the final pillar Jim has told you about!
The stage is set .the act will come to a final curtain call and gold in hand is your ultimate lifeline.
CIGA "The Gordon"

Buffett bearish on currencies holding value Greek crisis will produce ‘high drama,’ Berkshire chairman predicts May 1, 2010, 1:08 p.m. EDT

OMAHA , Neb. (MarketWatch) — Warren Buffett said Saturday that he’s bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the global financial crisis.
The Berkshire Hathaway Inc. chairman also warned shareholders attending the company’s annual meeting that the Greek debt crisis will produce "high drama" and said it’s unclear how it ultimately will be resolved.
The financial crisis was stemmed by massive monetary and fiscal intervention in developed economies like the U.S. and the U.K. That’s shifted a private-sector debt mountain on to governments, increasing concern about sovereign risks.
One concern is that governments will print lots of new money to pay debts, undermining the value of currencies and triggering a damaging bout of inflation.
"Events in the world over the last few years make me more bearish on all currencies in terms of holding their value over time," Buffett said.

Credit-rating agencies under fire in Europe crisis.




Riots, Violence Break Out at Greek May Day Rallies.




Dr. Doom Roubini: Euro collapse imminent




After the IMF Bails Out Europe, the U.S. May Have to Bail Out the IMF


Greek Debt Crisis Rattles Asian Markets, Sends Oil Price Tumbling



Spain Downgrade Sparks European Sell-off; Greece Bans Short-Selling as Panic Spreads




Europe will fall first then Britian and finally America. It is no longer "IF" but when...


33 States are bankrupt in the U.S. We will print money to infinity and paper over the dept as long as possible. Printing money causes inflation, printing alot of money causes hyperinflation.


Read your history on Weimar Germany and Zimbabwe, we will soon be following in their footsteps...You can thank obama for this...


Is Britain Heading for a Greek Tragedy?




The Death of Goldman Sachs




Greek Crisis Compared to "Ebola Virus"; IMF Warns Problem Could Spread Across Europe




How Al Gore is reducing his carbon footprint, and preparing for the dramatic sea-level rise that he predicted: Al Gore, Tipper Gore snap up Montecito-area villa; The Italian-style home has an ocean view, fountains, six fireplaces, five bedrooms and nine bathrooms.


Is Britain Heading for a Greek Tragedy?






They will do this after hyperinflation takes off and will mean absolutly nothing...
Fed Takes Steps on Eventually Pulling Back Billions in Aid