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When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see money flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed.
Ayn Rand
Atlas Shrugged, page 413
Dear CIGAs,
Rick Santelli has a sound message in what he says, but his understandable anger dilutes it. Still it is worth a listen.
Important notes:
Paul Volcker, Democrat and Chairman of the Presidential Committee of Economic Advisors, stated today in congressional testimony that the present Treasury plan for financial reform will lead to additional bailouts by designating non-banks as "systemically important." I would add that this action when undertaken would continue the program of socializing losses and privatizing profits.
China today announced that they were entering into another energy transaction costing a minimum of $2.5 billion US. The march out of dollars into energy, metals, material, agriculture and firms involved therein continues almost on a daily basis. They most certainly are NOT dollar bound and soon the US dollar will become the least percentage of their reserves. It never was even 50%. The talking heads might be amazed to hear that FACT.
Jim Sinclair’s Commentary
Do you really believe that any other government formed in Afghanistan will be different?
I interpret this as saying that the US military can succeed but for sustainability the US military will have to run the place.
Afghanistan Government too corrupt to consolidate US military’s efforts
September 28th, 2009
KABUL – Though the US commander in Afghanistan, General Stanley McChrystal, has urged the US to repeat an Iraq-style surge in Afghanistan, the Obama administration thinks all the efforts will come to nought as the Hamid Karzai Government is too corrupt.
General McChrystal has reportedly asked for another 40,000 troops, over the 21,000 troops that Obama has already sent. But, it has not garnered enough support from the Obama administration yet.
Although, the US is confident that its military has the intelligence and adaptability to fight a successful counterinsurgency in Afghanistan, it is concerned that the Afghanistan government has become so corrupt that it cannot consolidate the gains the US military makes, Csmonitor.com reports.
Jim Sinclair’s Commentary
Re-acceleration on the economic downside is NOT dollar positive.
It is amazing to see how gold flies up and down in the inverse with every 10/100 of a point change in the US dollar.
U.S. Economy Weakened in August, Chicago Fed Says
Monday, September 28, 2009
The scent of double dip is in the air.
Only one of the four broad categories of indicators made a positive contribution in August. The production and income component was positive for the second straight month. Employment, consumption and housing, and sales made negative contributions.
Thirty-one of the 85 indicators made positive contributions. Forty-seven of the 85 indicators improved relative to July.
The index was at negative 2.01 in August 2008, and was at negative 4.13 in January The Chicago Fed’s National Activity Index dropped back to negative 0.90 in August from an upwardly revised negative 0.54 in July.
Jim Sinclair’s Commentary
Stratfor calls it a test. I call it world class madness because the what ifs are dangerous beyond words. Israel is the wild card in Iran’s position that may seek no permission from anyone to defend itself.
Obama’s Move: Iran and Afghanistan
September 28, 2009
By George Friedman
During the 2008 U.S. presidential campaign, now-U.S. Vice President Joe Biden said that like all U.S. presidents, Barack Obama would face a foreign policy test early in his presidency if elected. That test is now here.
His test comprises two apparently distinct challenges, one in Afghanistan and one in Iran. While different problems, they have three elements in common. First, they involve the question of his administration’s overarching strategy in the Islamic world. Second, the problems are approaching decision points (and making no decision represents a decision here). And third, they are playing out very differently than Obama expected during the 2008 campaign.
During the campaign, Obama portrayed the Iraq war as a massive mistake diverting the United States from Afghanistan, the true center of the “war on terror.” He accordingly promised to shift the focus away from Iraq and back to Afghanistan. Obama’s views on Iran were more amorphous. He supported the doctrine that Iran should not be permitted to obtain nuclear weapons, while at the same time asserted that engaging Iran was both possible and desirable. Embedded in the famous argument over whether offering talks without preconditions was appropriate (something now-U.S. Secretary of State Hillary Clinton attacked him for during the Democratic primary) was the idea that the problem with Iran stemmed from Washington’s refusal to engage in talks with Tehran.
Jim Sinclair’s Commentary
It is not hard to read the emotions of those with whom I speak.
There is no question whatsoever that we have the fundamentals right. There is no way the US dollar will get through this fall without a significant fall.
I can only conclude that fear rises amongst a community at exactly the wrong time.
This I do know: Gold is going to $1224, $1650 and then on to Alf’s numbers.
U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says
By Sonia Sirletti and Jeffrey Donovan
Sept. 4 (Bloomberg) — The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.
“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”
Roubini said he didn’t see a risk of a dollar crash in the “‘short term.” The value of the U.S. currency relative to currencies such as the yen or the euro “cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that’s going to warp any chance for the European economy to recover, same argument as to the yen,” he said.
“Most of the adjustment of the dollar in the future has to occur relative to China, relative to emerging Asia and relative to some of the other commodity exporters in the world, whether these are advanced economies or emerging markets,” he said.
Jim Sinclair’s Commentary
This is gaining legs from every corner. The dollar question has changed significantly since we started our countdown of days, has it not? The value of the US dollar is a momentum of buying question.
World Bank says don’t take dollar’s place for granted
Sun Sep 27, 2009 2:18pm EDT
WASHINGTON (Reuters) – World Bank President Robert Zoellick said the United States should not take the dollar’s status as the world’s key reserve currency for granted because other options are emerging.
In excerpts released on Sunday from a speech that he is to deliver on Monday, Zoellick said global economic forces were shifting and it was time now to prepare for the fact that growth will come from multiple sources.
"The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency," he said. "Looking forward, there will increasingly be other options."
Zoellick said that a meeting of Group of 20 rich and developing countries in Pittsburgh on Thursday and Friday had made "a good start" toward increased global cooperation but they will have accept global monitoring of their activities.
"Peer review will need to be peer pressure," he said.
Zoellick said that the G20, as the new chief forum for international economic cooperation, also must not forget the 160 countries left outside its structure and should try to open opportunity for them.
"We need a system of international political economy that reflects a new multi-polarity of growth," Zoellick said. It needs to integrate rising economic powers as ‘responsible stakeholders’ while recognizing that these countries are still home to hundreds of millions of poor and face staggering challenges of development.".
Jim Sinclair’s Commentary
This article is a scathing indictment of the present OTC derivative business which will confirm to you many of the lessons offered here on JSMineset.
You will note the size of the market is correctly quoted, correctly described and the fact that there is no improvement is made quite clear. This is a case we want to watch closely.
Morgan Stanley Sued Over a Bad Derivative Bet
September 28, 2009
Jeff Nielson
An intriguing news item this week was the announcement that Citigroup (C) is suing Morgan Stanley (MS) for $245 million, alleging non-payment from Morgan Stanley regarding a “credit default swap” (i.e. default insurance) which Citigroup purchased from Morgan Stanley.
Apart from the vicarious joy of watching one Wall Street bankster suing another, the story seemed to lack a great deal of relevance – given that the amount of the suit (a mere $245 million) is nothing more than “pocket change” in a derivatives market recently valued at over $1 quadrillion ($1,000,000,000,000,000). Put another way, the derivatives market was/is 4 million times the size of the damages sought after in this suit. However, sifting through the limited details available provides some sobering insights.
To begin with, the statement of claim notes that it only cost Citigroup $750,000 for this credit default swap. It further adds that the damages sought were the net amount owing on this CDS after the “collateral” for this agreement had been “liquidated”. Thus, even after reducing the amount owing by the collateral which covered this obligation, Morgan Stanley would be required to make a greater-than 300:1 pay-out on this CDS.
As we already saw with the meltdown of AIG (the “king” of the CDS market), the companies which underwrote these “insurance” contracts never contemplated that they would ever have to make good on these agreements. The entire purpose of this market was to fraudulently reduce the perceived risk of the “toxic” securities peddled by the Wall Street crime syndicate – in order that their “partners in crime” (the credit rating agencies) could rubber-stamp inflated credit ratings on these financial products.
