To the CIGAS all round the world:

In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.
–Eric Hoffer – Longshoreman, Philosopher

My Dear Friends,

The upcoming legislation defining the powers of the Federal Reserve as the umpire of financial entities can only be described as Titanic in all the definition means. It is still in the blueprint stage but blueprints and buildings do have similarities in the final product.

1. There will be a secret club of financial institutions that will be considered, "Too Big To Fail."
2. The public will not be informed of who the members of this private club are.
3. A fund will be established by taxing these financial institutions in good times to fund protect them in the bad times.
4. The Federal Reserve has the power to determine and therefore change what the definition of solvency is.

Inviting conclusions:

1. If you are a member of the "Too Big To Fail" club and will have to pay for rescue then why not take wild risks because if you are good you will be punished, and if you are bad you will be rewarded by rescue which so far pays the losses.
2. You know that this fund will never cover the degree of risk now or IN THE PAST being played with abandon.
3. This means, if the plan is enacted, that in the end the size of the disaster now or in the future will be paid for by the innocent citizens in the form of Federal Debt.
4. This plan, if enacted, will guarantee the financial capacity of the present mountain of financially bankrupt OTC derivatives outstanding that are held or shared by the "Too Big To Fail" club.
5. It is clear that no US citizen under the law and taxation can enjoy financial privacy while secrecy is legislated for financial institutions considered too big to fail.

By omission, the "Too Small To Matter’s" are flushed.

The implications of this blueprint are vast and downright frightening.

Bank of America, CIT Group, Citigroup: U.S. Equity Movers

Oct. 30 (Bloomberg) — Shares of the following companies had unusual moves in U.S. trading. Stock symbols are in parentheses and prices are as of 4 p.m. in New York.

Banks fell after the chairman of the U.S. House Financial Services Committee said he will support requiring them to pay into a fund used to unwind large firms that fail. Legislation will be amended to create an assessment on institutions with more than $10 billion of assets, Barney Frank, a Massachusetts Democrat, said today in an interview on Bloomberg Television’s “Political Capital with Al Hunt” being broadcast this weekend.

Bank of America Corp. (BAC:US) fell 7.3 percent to $14.58 for the biggest drop in the Dow Jones Industrial Average. JPMorgan Chase & Co. (JPM:US) fell 5.8 percent to $41.77. Morgan Stanley (MS:US) declined 4.6 percent to $32.12.

Citigroup Inc. (C:US) fell 5.1 percent to $4.09. The lender 34 percent owned by the U.S. government may have a $10 billion writedown of deferred tax assets in the fourth quarter, CNBC reported, citing comments on a conference call by Michael Mayo, an analyst with Calyon Securities USA Inc.

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Jim Sinclair’s Commentary

Nine down this Friday. Do you really believe that QE can be reduced?

Bank Closing Information
October 30, 2009

These links contain useful information for the customers and vendors of these closed banks.

·         North Houston Bank, Houston, TX
·         Madisonville State Bank, Madisonville, TX
·         Citizens National Bank, Teague, TX
·         Park National Bank, Chicago, IL
·         Pacific National Bank, San Francisco, CA
·         California National Bank, Los Angeles, CA
·         San Diego National Bank, San Diego, CA
·         Community Bank of Lemont, Lemont, IL
·         Bank USA, NA, Phoenix, AZ

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Nine U.S. banks seized in largest one-day haul
Sat Oct 31, 2009 5:44am EDT
By Sam Mircovich and Edwin Chan

LOS ANGELES (Reuters) – U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation’s banking industry are being crippled by bad loans.

The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

Visibly worried employees lined up to file into Cal National’s head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers’ fate explained to them, regulators said.

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Jim Sinclair’s Commentary

The Green Hornet sends a table which sustains the wasted program, Cash for Clunkers except in accelerating the GDP at the cost of future GDP reports in order to claim an end to the recession

The chart below sets forth actual SAAR (Seasonally Adjusted Annual Rate) compared to Edmunds.com’s forecasted rate if the program had never been implemented.

"Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase," Edmunds.com Senior Analyst David Tompkins, PhD told AutoObserver.com. "That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak."

Jim Sinclair’s Commentary

If a program for a common share was to provide an orderly decline for its holders what do you think would be the result?

It would be a total collapse of that share as soon as the program was understood.

What makes you think it will be different with a common share of a country?

An orderly decline
By Peter Garnham
Published: October 30 2009 17:49 | Last updated: October 30 2009 17:49

The financial crisis has pushed the issue of the dollar’s status as the world’s reserve currency to the forefront of the market’s agenda. And as ultra-loose US fiscal and monetary policies have weighed on its value, so calls for an alternative to the US currency as the world’s numeraire have increased.

China has been in the vanguard, with Zhou Xiaochuan, central bank governor, calling for the creation of a new super-sovereign currency. Zhou said in March that the role could be filled by the so-called special drawing right, a basket of currencies used as a unit of account by the International Monetary Fund.

Russia has been vocal in its support for the proposal. At the G8 summit in Italy in the summer, Dmitry Medvedev, president, unveiled a coin he said represented a “united future world currency”. “We are discussing both the use of other national currencies, including the rouble, as a reserve currency, as well as supranational currencies,” he said. Many analysts see such rhetoric as a distraction, arguing there is little prospect of the dollar being supplanted in the near future. Indeed, the comments from China and Russia are widely regarded as reflecting fears over the value of their own dollar holdings.

This is particularly true of China, which has amassed $2,273bn of dollar reserves – the world’s largest stockpile – as a consequence of maintaining the Chinese renminbi at relatively weak levels against the dollar over the past decade as it has pursued an aggressive policy of export-led growth.

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Jim Sinclair’s Commentary

Turkey takes a giant step away as these moves from the dollar continue.

Note Turkey flexing the muscles it thinks it has.

Turkey to use national currencies in trade with Iran, China

ANKARA, October 28 (RIA Novosti) – Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.

Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world’s major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February.

Turkey’s decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies.

"We have adopted a necessary legislative act and are prepared for the transition," the Turkish newspaper Milliyet quoted Erdogan as saying.

According to the paper, Turkey’s trade with Russia, Iran and China exceeds $65 billion a year. Russia is Turkey’s largest trade partner, with $37.8 billion commodity turnover registered last year.

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Jim Sinclair’s Commentary

There is another inviting conclusion.

The debt will be inflated away either by plan, or accident.

Up Against a Wall of Debt
How much can governments borrow?
Oct 29, 2009
Robert J. Samuelson

The idea that the government of a major advanced country would default on its debt—that is, tell lenders that it won’t repay them all they’re owed—was, until recently, a preposterous proposition. Argentina or Russia might stiff their creditors, but surely not the likes of the United States, Japan, or Great Britain. Well, it’s still a very, very long shot, but it’s no longer entirely unimaginable. Governments of rich countries are borrowing so much that it’s conceivable that one day the twin assumptions underlying their burgeoning debt (that lenders will continue to lend and that governments will continue to pay) might collapse. What happens then?

The question is so unfamiliar that the past provides few clues to the future. Psychology is decisive. To take a parallel example: the dollar. The fear is that foreigners (and Americans, too) lose confidence in its value and dump it for yen, euros, gold, or oil. If too many investors do that, a self-fulfilling stampede could trigger sell-offs in U.S. stocks and bonds. People have predicted such a crisis for decades. It hasn’t happened yet. The currency’s decline has been orderly, because the dollar retains a bedrock confidence based on America’s political stability, openness, huge wealth, and low inflation. But something could shatter that confidence, tomorrow or 10 years from tomorrow.

The same logic applies to exploding government debt. We have moved into uncharted territory and are prisoners of psychology. Consider Japan. In 2009, its budget deficit—the gap between spending and taxes—amounts to about 10 percent or more of gross domestic product (GDP). Its total government debt—the borrowing to cover all past deficits—is approaching 200 percent of GDP. That’s twice the size of the economy. The mountainous debt reflects years of slow economic growth, many "stimulus" plans, an aging society, and the impact of the global recession. By 2019, the debt-to-GDP ratio could hit 300 percent, says a report from JPMorgan Chase.

No one knows how to interpret these numbers. If someone had predicted 20 years ago that Japan’s government debt would rise so spectacularly, the forecast would doubtlessly have inspired alarms: "The debt will be unmanageable; Japan will pay crushing interest rates as fearful lenders demand high returns to compensate for the risk that government might default or inflate away its debt." Instead, just the opposite has happened. Japanese investors—households, banks, insurers—have absorbed 94 percent of the debt. Interest rates on 10-year Japanese government bonds (JGBs) have dropped from 7.1 percent in 1990 to 1.4 percent now.

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Jim Sinclair’s Commentary

Be Serious. This is totally out of control.

It cannot be withdrawn, reduced, or erased except by one method, INFLATION of the Currency in which the underlying debt is denominated.

Deficits Over Time and the Interest Paid on Them
Newsweek

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