Dear CIGAs,

In case you missed it China announced a few days ago that they have made the decision to increase strategic energy supplies. That means here and at the general market range. This has to tell you something about their serious concern for the level of the dollar as hyperinflation is a currency event, not an economic supply/demand event.

Jim Sinclair’s Commentary

A fast, clean, painless GM bankruptcy. That is the equivalent of the Great Depression of a jumbo shrimp.

Perils ahead in GM bankruptcy include liquidation, pension shortfall

We’ve got a new D-Day in the historic General Motors Corp. bankruptcy: If the automaker’s good assets cannot be sold to a "New GM" by July 10, CEO Fritz Henderson told a bankruptcy judge in New York today, the company will be forced to begin liquidation proceedings.

Leave it to Henderson, nothing if not direct, to cut to the heart of GM’s existential predicament. Is it yet another riff on the "shock-and-awe" strategy popularized last fall, which posited that a collapse of GM into bankruptcy or worse would prove cataclysmic for the national economy and, certainly, the Midwest. Yes, it is.

And, to a point, it’s probably true — emphasis on the "to a point" part. Team Obama may be intent on getting a speedy resolution to this silly little thing called the largest industrial bankruptcy in American history. And its Treasury Department has a penchant, at least in the Detroit Auto space, for setting tight deadlines and meeting them. But I’m not at all convinced the boss and his minions would let the General collapse into a heap of cut-rate auctions if the judge drags his feet.

Too much to lose. Too much political capital investment, even by the president. Too much danger to organized labor, the staying power of GM’s pension fund and auto communities in the Heartland. Indeed, an emerging fear — emerging, at least, in the public consciousness — is the likelihood that GM is burning its pension fund on buy-outs and early retirements at a faster rate than anticipated, as the New York Times details in an important story story posted late today. The danger is that pension obligations will run ahead of GM’s ability to pay them, meaning U.S. taxpayers would foot the difference through the entity known as the Pension Benefit Guaranty Corp.

"GM basically raided the pension plan, by having a lot of these severance benefits paid through it," Douglas J. Elliott, a fellow with the Brookings Institution who specializes in financial institutions and policy, told The Times. Active workers "could find that they don’t get their full pensions when they retire, because the plan has had to be terminated because of the payments to current retirees. There are definitely these intergenerational transfer issues with underfunded pensions."

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Jim Sinclair’s Commentary

I am not sure that Mr. Leahy is familiar with India’s tradition of having their wives wear the bank.

Certainly the new India and the make believe world of Bollywood is a large group of speculators ripe for the picking.

In general the chance of mobilizing the majority of Indian gold is well below zero.

India gold dealers tap domestic stocks
By Joe Leahy in Mumbai
Published: June 29 2009 18:52 | Last updated: June 29 2009 18:52

Indians are set to begin trading on Tuesday on the country’s new gold bullion market in a move likely to mobilise the thousands of tonnes of the precious metal that people keep hidden under their beds as savings.

The National Spot Exchange, controlled by Financial Technologies, the Indian market company, will begin offering contracts for domestic gold bullion, ranging in size from 8g to 1kg.

“Though India has a huge household stock of around 20,000 to 25,000 tonnes of gold, there was no single market available where this could be sold,” said Anjani Sinha, managing director and chief executive of the National Spot Exchange.

Indians have saved in gold for millennia. The country is the world’s largest consumer of the metal, importing nearly 800 tonnes a year, or 20 per cent of global demand.

But while there is a modern market for the import of bullion, once it enters India, there is no transparent exchange for its resale and conversion back into bullion.

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