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Jim Sinclair’s Commentary
Faber is wrong as increasing interest rates are meaningless as a tool to stop hyperinflation which is a currency event. How in the world can Farber not understand that axiom?
U.S. Inflation to Approach Zimbabwe Level, Faber Says (Update2)
By Chen Shiyin and Bernard Lo
May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”
Dear Friends,
If you had ears to hear you will recognize that today, after four months of having promised without any delivery, the Obama Administration in his Nellis Air Force Base speech on solar energy began his first meaningful FISCAL STIMULATION (466 million, small, but a start).
Fiscal Stimulation is like a magnet to Monetary Stimulation whereby the later is pulled out into price inflation. It will occur according to the amount and cost of FISCAL programs he starts.
The magnet for hyperinflation is the US dollar below USDX .8200 and .7200 as a currency event.
Respectfully yours,
Jim
Jim Sinclair’s Commentary
This is not playing with fire. It is playing with the fate of a nation for decades to come and the lives of its citizens, all to rescue Wall Street and the OTC derivative gang.
U.S. Treasury and Federal Reserve. Federal Reserve holding over $2 trillion in the Darkest Balance Sheet in Financial History.
The U.S. Treasury and the Federal Reserve have arguably two of the least transparent balance sheets known to humankind. This wouldn’t be such a big issue if the amount of money funneled into these organizations was small. That is not the case. The Federal Reserve since October of 2008 has held on its balance sheet over $2 trillion in reserve bank credit and also, Federal Reserve Holdings of U.S. Treasuries. This of course is the biggest bait in switch in history because in exchange for U.S. Treasuries, banks can offload practically any collateral (i.e., mortgages, auto loans, credit card loans, etc). The U.S. Treasury and Federal Reserve are creating the biggest put option in the history of the world and the American taxpayer stands to lose big.
Let us take a look at the Fed’s balance sheet:
The Fed doubled its balance sheet in the matter of a few weeks. It went from approximately $900 billion to $1.8 trillion in lightning speed. And with this speed, the public unfortunately did not know what they were exactly buying into. It is important to take a look at the Federal Reserve balance sheet broken down by category:
Jim Sinclair’s Commentary
There will be a gang of trucks with chains looking for these ATMs.
German firm plans gold ATMs to meet growing demand
By Peter Starck FRANKFURT,
May 19 (Reuters) – Private investors should hold up to 15 percent of their wealth in physical gold, according to a German asset management company which plans to set up 500 ‘Gold-To-Go’ ATMs in Germany, Switzerland and Austria this year.
A gold-dispensing automatic teller machine (ATM) was on display at Frankfurt’s main railway station for a one-day marketing test on Tuesday.
A one-gram (0.0353 ounce) piece of gold, the size of a child’s little fingernail and about as thin, cost 31 euros ($42.25) — a 30 percent premium to the spot market price .
The flat rectangular piece, bearing the imprint of Belgian metals and speciality materials firm Umicore (Brussels) , came out of the cash-only ATM in a tin box, including a certificate of authenticity.
‘This is more than a marketing gimmick,’ said Thomas Geissler, chief executive of TG-Gold-Super-Markt.de, the company planning to set up the 500 gold ATMs at a cost of 20,000 euros apiece.
‘It is an appetizer for a strategic investment in precious metals. Gold is an asset everyone should have, between 5 and 15 percent of your liquid assets in physical gold,’ he told Reuters in an interview.
Jim Sinclair’s Commentary
This is an inviting conclusion until the dollar goes into a freefall and hyperinflation is visible even to the Money Bunnies. Then equities for no good reason fundamentally will join gold in an up-move.
Jim Sinclair’s Commentary
China and other larger dollar holders will not stand still for this.
Exploding debt threatens America
John Taylor
Published: May 26 2009 20:48 | Last updated: May 26 2009 20:48
Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up.
Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.
Jim Sinclair’s Commentary
Regardless of the daily bankruptcy GM is on, it doesn’t mean anything now. You can be assured it is a total disaster for the US economy.
GM says bondholder offer fails; bankruptcy likely
By TOM KRISHER and DAN STRUMPF
AP Auto Writers
(AP:DETROIT) A General Motors Corp. bankruptcy filing seemed inevitable after a rebellion by its bondholders forced it to withdraw on Wednesday a plan to swap bond debt for company stock.
GM has until Monday to complete a government-ordered restructuring that includes debt reduction, labor cost cuts and plant closures. But a bankruptcy reorganization is likely after the company said its offer to exchange $27 billion in unsecured debt for 10 percent of the company’s stock had failed. GM has received $19.4 billion in federal loans.
The move came as crosstown rival Chrysler LLC headed to court Wednesday to ask bankruptcy judge for permission to sell the bulk of its assets to a group headed by Italy’s Fiat Group SpA in hopes of saving itself from liquidation. Attorneys for Chrysler maintain that the Fiat deal is the company’s only hope to avoid being sold piece by piece, but car dealers, debtholders, former employees and others are protesting.
Chrysler filed for bankruptcy protection April 30, after the government ended talks with a group of holdout debtholders. Both automakers were pulled down by overwhelming debt, high pension, health care and other labor costs relative to competitors, a global auto sales slump and a dismal U.S. housing market that pulled down demand for pickup trucks, their top-selling vehicles.
News of the failed GM bond exchange offer sent its shares down 22 cents, or 15.3 percent, to $1.22 in afternoon trading.
Jim Sinclair’s Commentary
A state law concerning guns and martial law. Wow, things are getting dicey out there!
Proposal Stopping Confiscation Of Guns Now Law
Posted: May 23, 2009 07:15 PM
(AP) NASHVILLE, Tenn. – A person who legally possesses a gun would not have it seized during periods of martial rule under a proposal that has been signed into law by the governor.
The measure was signed by Gov. Phil Bredesen on Thursday and takes effect immediately.
Sponsors say martial rule is the same as martial law at the federal level. They say the law is necessary after law enforcement in New Orleans went door to door seizing weapons in the aftermath of Hurricane Katrina.
Republican Sen. Jack Johnson of Brentwood, one of the sponsors, has said he doesn’t expect such behavior in Tennessee, but believes legislation should be in place just in case.
Jim Sinclair’s Commentary
The market feels Kim of North Korea is full of hot air. He may or may not be but this answers the many questions over the past few days of why gold ignores North Korea nukes and threats.
Now if you want to see real problems, review what is occurring and pay attention to the special note from Debka at the bottom.
I have always thought Debka was Massaud.
The Russians are heading to the Middle East to put a shield between Israel and Russia’s trading partner Iran.
Russian warships call at Syrian port
15:5529/01/2009
MOSCOW, January 29 (RIA Novosti) – A group of Black Sea Fleet warships has called at the Syrian port of Tartus, a Russian Navy spokesman said on Thursday.
Capt. 1st Rank Igor Dygalo said the Azov and Yamal landing ships had docked at Tartus to replenish supplies.
He previously said the two warships, which were carrying naval infantry units, would join up with other Russian warships in the Indian Ocean, including the Pyotr Veliky nuclear-powered missile cruiser, for the INDRA-2009 exercise with the Indian Navy in late January.
Russian media recently reported that Russia was planning to set up naval facilities in Yemen (Socotra), Syria (Tartus), Libya (Tripoli), Vietnam (Cam Ranh), among other countries, in the next few years as an alternative to the Sevastopol base in Ukraine’s Crimea.
US and Russian warships line up in dispute over Georgia
Ian Traynor in Brussels
US and Russian warships took up positions in the Black Sea today in a risky war of nerves on opposing sides of the Georgia conflict.
With the Russians effectively controlling Georgia’s main naval base of Poti, Moscow also dispatched the Moskva missile cruiser and two smaller craft on "peacekeeping" duties at the port of Sukhumi on the coast of Abkhazia, the breakaway region that the Kremlin recognised as independent yesterday.
The Americans, wary of escalating an already fraught situation, cancelled the scheduled docking in Poti of the US Coast Guard vessel, the Dallas, and instead sent it to the southern Georgian-controlled port of Batumi, 200km (124 miles) from the Russian ships, where it delivered humanitarian aid.
Russian Warships To Dock In Syria
In an effort to expand its military presence in the international arena and reestablish a naval presence in the Middle East, Russia has dispatched a naval fleet to the region, including a guided missile cruiser, two anti submarine ships and 47 fighter planes. The fleet will dock at the Syrian port of Tartus where Russia maintains a technical base. At the same port, Iranian ships are also docked.
Russian Defense Minister Anatoly Serdyukov told reporters that the expedition "is aimed at ensuring a naval presence and establishing conditions to secure Russian navigations." Serdyukov added that the fleet will conduct tactical exercises with real and simulated launches of sea and air based missiles and intends to call at a number of different ports in the region.
In the past, Russian President Vladimir Putin stressed that Russia would respond in the event Iran was attacked by a foreign power. Boosting Russia’s naval presence in the area could well be an attempt to signal to Israel and possibly America that if Iran is attacked, Russia will strike back.
Russia’s first Persian Gulf naval presence coordinated with Tehran
DEBKAfile Exclusive Report
May 26, 2009, 6:47 PM (GMT+02:00)
Russian warships are due to call Wednesday, May 27, at the Bahrain port of Manama, seat of the US Fifth Fleet in the Persian Gulf, DEBKAfile’s military sources reveal. They will be following in the wake of the Russian vessels already docked at the Omani port of Salalah, the first to avail themselves of facilities at Gulf ports.
Their arrival is fully coordinated between the Russian and Iranian naval commands.
According to our sources, this is the first time a Russian flotilla will have taken on provisions and fuel at the same Gulf ports which hitherto serviced only the US Navy. Moscow has thus gained its first maritime foothold in the Persian Gulf.
The flotilla consists of four vessels from Russia’s Pacific Fleet: The submarine fighter Admiral Panteleyev is due at Manama Wednesday, escorted by the refueling-supply ship Izhorai, The supply-battleship Irkut and the rescue craft BM-37 are already docked in Salalah.
DEBKAfile’s military sources report that the Russians, like the Iranians, cover their stealthy advance into new waters by apparent movements for joining the international task force combating Somali pirates. While Iranian warships have taken up positions in the Gulf of Aden, the Russians are moving naval units southeast into the Persian Gulf.
Monday, May 25, the Iranian naval chief, Adm. Habibollah Sayyari, announced that six Iranian warships had been dispatched to "the international waters" of the Gulf of Aden in a "historically unprecedented move… to show its ability to confront any foreign threats." He did not bother to mention the pirates.
Jim Sinclair’s Commentary
If banks are permitted to bid on their own Toxic Assets in the public/private lending auction, it is the same as having a shill at an auction for the purpose of creating the price desired by the bank, thereby preventing any hint of true valuation.
Of course, if you can trust the honesty of banksters, I would be wrong.
What do you think?
Regards,
Jim
Jim Sinclair’s Commentary
Falling off the cliff is starting to happen. This can be seen through all official and establishment estimates of the Federal Deficit going into the trash can. The Formula rolls on.
IRS tax revenue falls along with taxpayers’ income
By John Waggoner, USA TODAY
Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.
When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."
For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.
"These are staggering numbers," Lynch says.
Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years.
"It’s one of the drivers of the ongoing expansion of the federal budget deficit," says John Lonski, chief economist for Moody’s Investors Service. The Congressional Budget Office projects a $1.7 trillion budget deficit for fiscal year 2009.
Jim Sinclair’s Commentary
Taxing the consumer (that is what a VAT tax is and inflationary by simple edict) is a great way to make the Formula more effective in running the Federal Budget Deficit further into the trash-can as it will cut short any incipient economic recovery.
If anyone of you believe in Green Shoots, a VAT tax is a super powerful plant killer.
What a bunch of lightweights that think higher taxes will positively affect the Federal Budget Deficit. They never really consider putting spending aside as they feel it is all necessary. DUMB! World class DUMB!
Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look
Levy Viewed as Way to Reduce Deficits, Fund Health Reform
By Lori Montgomery
Washington Post Staff Writer
Wednesday, May 27, 2009
With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."
A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.
Jim Sinclair’s Commentary
Yes, and it is coming in three weeks or less.
Gold May Be On Verge Of Historic Breakout
By Peter Brimelow, MarketWatch
Is this it for gold? After a good week, gold watchers of all stripes think it
may be. Again.
After Friday’s 0.8% rise to $958.50 a troy ounce, Martin Pring, decidedly not a gold bug, set the tone in his Weekly InfoMovie Report: "Gold could be on the verge of a historical breakout. Watch that $990-$1,000 area like a hawk."
Pring has always laid very heavy emphasis on the predictive power of gold shares. His analysis: "The gold-share ETF, the GDX [Market Vectors Gold Miners ETF (GDX)], has just broken out from a major base. Since the shares often lead the metal, this is a bullish factor."
Dow Theory Letters’ Richard Russell has also been interested in GDX, saying this after Friday: "Ordinarily I would only add gold items on a correction. But gold seems on a roll now, so I added GDX."
Two developments are causing the excitement about gold. From a charting point of view, gold shares are generally agreed to have broken out, meaning that gold itself could well be about to do something very important. Australia’s The Privateer (whose free U.S.-dollar 5X3 Point-and-Figure chart looks very handsome after Friday) describes the situation:
"What is being traced … is a gigantic ‘reverse’ head-and-shoulders formation. The trading range between US$900 and US$1,000 was broken early in April. Over the month of April, a tighter range between US$870-US$910 was established. Now, gold has broken back above that range. The ‘right shoulder’ on the ‘reverse’ head-and-shoulders formation is getting wider. … There are two major resistance points. The first is at US$955 … where the chart is now. The second is, of course, at US$1,000, the level reached in March 2008 and again in February 2009." See chart.
Several other commentators see the same thing.
The second bullish gold development: general economic conditions.
As the Gartman Letter noted on Wednesday: "The dollar does look vulnerable. … Pushing government steadily leftward, the Obama Administration has set up the possibility of a U.S. dollar rout. … If this persists, commodity prices generally shall rise and rise materially, and gold shall too."
Dan Norcini at the Jsmineset Web site saw things similarly on Friday.
Jim Sinclair’s Commentary
1. Israel makes a significant miscalculation
2. Pakistan goes Taliban
3. Turkey is a Victim.
al-Sadr in Turkey
May 26, 2009 7:00 AM | Anna Mahjar-Barducci
Journalist
Moqtada al-Sadr, the most prominent Shi’ite opponent of the United States’ military presence in Iraq, paid an official visit to Turkey for talks with the Turkish leadership. This was al-Sadr’s first public appearance since 2007.
It appears that the main reason for the Turkish government inviting Al-Sadr, was to ensure his support for Ankara’s policies toward the oil rich Iraqi city of Kirkuk, which is mainly composed of Kurds, Turkomans and Arabs – though almost all its ethnic elements are Shi’ite.
No official statement was released from the meetings with Turkish officials. An unidentified Turkish official declared that the discussions had evolved over the security situation in Iraq and the Turkish-Iranian relationships. The Turkish media reported that Ankara had sent a private plane to Iran to take Al-Sadr to Turkey. To ensure his security, a close protection team from the National Security Agency (MIT) went to Iran to minimize the risks during his trip to Turkey. According to Turkish reports, Sadr met with Prime Minister Erdogan and President Abdullah Gul, along with other Turkish officials.
Al-Sadr supports Turkey’s position over the status of Kirkuk, arguing that it should belong to the central government. The Kurdish daily, Helwer Post conducted an in-depth analysis to explain Al-Sadr’s opposition to the federal structure of Iraq, and particularly the special status of Baghdad and Kirkuk and the distribution of oil wealth. The Helwer Post suggests that because Al-Sadr’s supporters are mainly concentrated in Baghdad and to some extent in Kirkuk, this limits his ability to share the wealth of oil revenues. The status of Baghdad within a loose federation restricts Al-Sadr’s group accessing the oil rich regional administrations. If Iraq emerges as a viable federation, in the near future the Al-Sadr group will be economically and politically marginalized within Baghdad. Given that Al-Sadr cannot prevent an Iraqi federation, in order to access oil revenues he must keep Kirkuk within the control of Iraq’s central government rather than under the Kurdish Regional Government. Thus, it is critical for Al-Sadr to receive support from Turkey.
The timing of these meetings is also significant. On May 3, the Turkish press reported that UN diplomats working on the status of Kirkuk for more than one year had finally drafted their report. They suggested delaying for five years the planned referendum to determine the status of Kirkuk. As expected, Kurdish leaders strongly opposed these recommendations. Iraq’s President Jalal Talabani, a Kurd himself, clearly stated that he will not negotiate on the status of Kirkuk, which is already determined through the constitution.
