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"Ask yourself why totalitarian dictatorships find it necessary to pour money and effort into propaganda for their own helpless, chained, gagged slaves, who have no means of protest or defense. The answer is that even the humblest peasant or the lowest savage would rise in blind rebellion were he to realize that he is being immolated, not to some incomprehensible ‘noble purpose’, but to plain, naked, human evil."
— Ayn Rand
Dear CIGAs,
Here are the rules of MOPE:
1. MOPE must be carefully timed:
a. The communication must reach the audience ahead of the competing truth.
b. A MOPE campaign must begin at the optimum moment.
c. A MOPE theme must be repeated, but not beyond some point of diminishing effectiveness
2. MOPE must label events and people with distinctive phrases or slogans such as "gold bugs" and "carry trade."
a. They must evoke desired responses which the audience previously possessed.
b. They must be easily learned.
c. They must be utilized again and again, but only in appropriate situations.
d. They must be boomerang-proof.
Jim Sinclair’s Commentary
Be realistic. Greece is not in as bad a shape as California is.
The scariest of all things is that there are 40 states in various conditions of financial collapse right behind California.
This situation alone could be the dollar’s Terminator. Sleep on Sheeple!
California Creditors Dread IOUs With Aid Plea Failing
By Edwin Chen, John McCormick and Michael Marois
Jan. 13 (Bloomberg) — California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 24 percent since September.
“We recognize they have enormous problems,” David Axelrod, senior adviser to President Barack Obama, said in an interview. “But we can’t solve all of those problems from Washington.”
Investors are growing more concerned that California, whose debt rating was cut today by Standard & Poor’s, will repeat last year’s fiscal crisis that forced it to use IOUs to pay bills. With Governor Arnold Schwarzenegger seeking $6.9 billion in federal assistance to narrow the deficit, the extra yield paid on the state’s 10-year bonds over AAA-rated municipal securities rose to 1.31 percentage points yesterday from 1.06 points on Sept. 11, according to Bloomberg fair market value index data.
Schwarzenegger’s plea for help for California, the world’s eighth-largest economy, may become a test case for Obama, who last year called the Republican governor “an outstanding partner with our administration.” Dozens of states face budget shortfalls amid the worst recession since the Great Depression, and at least 36 have already reduced fiscal 2010 expenditures, according to the National Association of State Budget Officers.
Jim Sinclair’s Commentary
What a disaster has been wrought via the OTC derivative manufacturers and distributors explosion.
Wherever QE to infinity occurs on the planet a new demand for gold will arise. Wherever QE to infinity takes place a new Weimar Republic experience becomes probable.
Only Gold offers protection from this spreading planetary killer that our financial leaders have wrought and continue to cultivate.
A global fiasco is brewing in Japan
By Ambrose Evans-Pritchard
Last updated: January 12th, 2010
I have felt rather lonely after suggesting in my New Year Predictions that Japan is dangerously close to blowing up on its sovereign debts, with consequences that will be felt across the world.
My intended point — overly condensed — was that 2010 will prove to be the year that Japan flips from deflation to something very different: the beginnings of debt monetization by a terrified central bank that will ultimately spin out of control, perhaps crossing into hyperinflation by the middle of the decade.
So it is nice to have some company: first from PIMCO’s Paul McCulley, who said that the Bank of Japan should buy “unlimited amounts” of long-term government debt (JGBs) to lift the country out of a “deflationary liquidity trap” and raise the souffle again.
His point is different from mine, in that he discerns deflation “as far as the eye can see”. But in a sense it is the same point. Once a country embarks on such policies, the game is nearly up. The IMF says Japan’s gross public debt will reach 227pc of GDP this year. This is compounding at ever faster speeds towards 250pc by mid-decade.
The only reason why this has not yet blown up is because investors (mostly Japanese) have not yet had the leap in imagination required to understand their predicament, and act on it. That roughly is the argument of Dylan Grice from Societe Generale in his latest Popular Delusions note released today. “A global fiasco is brewing in Japan.”
Jim Sinclair’s Commentary
Below is a picture of the new airport check-in attire requirements. This eliminates your need to get to the airport 2 hours early, but you still have to take off your shoes.
Jim Sinclair’s Commentary
Just in case you forgot, the present dollar rally was predicated on economic recovery and sustainability.
- Bad Seasonals Continue to Bloat Reported Retail Sales
- 2009 Holiday Season Was a Bust, both Before and After Inflation Adjustment, Using Normal Seasonal Factors
"No. 271: December Retail Sales" by subscription
http://www.shadowstats.com/
Jim Sinclair’s Commentary
Let’s cut "Inland Security" some slack here. All 8 year olds are terrorists!
Meet Mikey, 8: U.S. Has Him on Watch List
Fred R. Conrad/The New York Times
Michael Hicks, 8, a Cub Scout in Clifton, N.J., has the same name as a suspicious person.
The Transportation Security Administration, under scrutiny after last month’s bombing attempt, has on its Web site a “mythbuster” that tries to reassure the public.
“Meet Mikey Hicks,” said Najlah Feanny Hicks, introducing her 8-year-old son, a New Jersey Cub Scout and frequent traveler who has seldom boarded a plane without a hassle because he shares the name of a suspicious person. “It’s not a myth.”
Michael Winston Hicks’s mother initially sensed trouble when he was a baby and she could not get a seat for him on their flight to Florida at an airport kiosk; airline officials explained that his name “was on the list,” she recalled.
The first time he was patted down, at Newark Liberty International Airport, Mikey was 2. He cried.
Jim Sinclair’s Commentary
You have to be careful of those "Erik the Reds."
Did the UK put them into the Axis of Derivative Evil? Remember the geniuses of Iceland’s financial problem was OTC derivatives sold to Iceland out of London, New York and Zurich by the usual suspects.
You can’t get blood from a rock.
Nordic Terror: UK Puts Iceland on Terrorist List
By: Ian Welsh Saturday October 25, 2008 12:30 pm
One of the casualties of the financial crisis which has gotten little notice in the US is Icleand, and it went down in a particularly ugly fashion. Gordon Brown, the UK’s fantastically unpopular Prime Minister, said that Icelandic banks had threatened to not honor obligations to British account holders, so he declared Iceland a terrorist country and seized the banks assets. This caused the banks to go under and the Icelandic economy to implode to the extent that if Russia hadn’t sent them billions of dollars, they would have literally starved, since they need to import food.
Yes, they asked the US and their friends in the EU for money first, but apparently only Vladimir Putin cared enough about Iceland’s impending famine to do anything about it. It’s times like these when you find out who your friends are. I imagine the Icelanders are feeling a lot warmer towards Russia these days. Perhaps Putin would like a nice naval base there?
Leaving aside, for just a moment, the absurdity of labeling Iceland a terrorist country, the problem is this: Icelanders are saying "prove it" with respect to the allegation that they threatened to not honor account withdrawals, and so far Gordon Brown hasn’t come up with proof.
The thing about Icelandic banks is that they were offshore banks. As a friend of mine in the industry said "this is where the City sent stuff that was too dubious even for them". Iceland made money by doing the deals that were, not dirt exactly, but highly highly speculative and leveraged and in some cases shady. (People go to offshore havens to dodge taxes and keep money private, after all.) Which is to say, the Brits knew these banks were shaky, because they were an extension of the city. So odds are, they just decided to preemptively seize the assets and shut them down, without even giving them a chance (or help.) This is also why Icelanders paid almost no tax, and lived well for years, because huge amounts of money were going into the country. Laissez faire stupidity works when you’re an island with a small population and huge amounts of money churn from foreigners.
Jim Sinclair’s Commentary
This has only started to fall off the cliff as per the 2006 Formula that the Banksters say no one knew, or could have known about.
State Tax Revenue in U.S. Drops Most Since 1963, Study Says
By Brian K. Sullivan
Jan. 7 (Bloomberg) — U.S. state tax collections fell the most in 46 years in the first three quarters of 2009 as the recession shrank revenue from sources including personal income, the Nelson A. Rockefeller Institute of Government said.
Revenue dropped 13.3 percent, or $80 billion, compared with the same nine months of 2008, to $523 billion, the institute said. Collections in the third quarter alone sank 10.9 percent to about $162 billion, according to the report released today by the Albany-based body. It was the fourth straight quarterly decline. The institute is the public policy research arm of the State University of New York.
“The first three quarters of 2009 were the worst on record for states in terms of the decline in overall state tax collections, as well as the change in personal income and sales tax collections,” Rockefeller analysts Lucy Dadayan and Donald J. Boyd wrote in the report. The institute explores ways to help state and federal governments work better.
The worst economic slump since the Great Depression has forced states to cut spending, raise taxes and pass down costs to local governments to cope with $193 billion of combined budget deficits in the current fiscal year, according to a Center on Budget and Policy Priorities report issued last month.
Budget gaps have opened in 31 states since fiscal year 2010 began, Dadayan and Boyd wrote, citing a National Conference of State Legislatures study.
Jim Sinclair’s Commentary
Another example of the difference between China and the West.
Either the West lacks a plan or the plan is a contradiction.
Panel: Treasury has no metric to meet its TARP goals
Congressional panel worries about implicit guarantees big banks still have
By Ronald D. Orol, MarketWatch
Jan. 14, 2010, 12:02 a.m. EST
WASHINGTON (MarketWatch) — The Treasury Department can use its broad principles to justify almost any decision it makes when unwinding the government’s stake in the $700 billion bank bailout package, according to a congressional oversight panel for the Troubled Asset Relief Program.
"The panel is concerned that, although Treasury has been consistent in articulating its principles, the principles as announced are so broad that they provide Treasury with a means of justifying almost any decision," the Congressional Oversight Panel wrote in its latest report entitled "Exiting TARP and unwinding its impact on the Financial Markets."
The statute creating TARP lists three principles that guide its determination of when to sell assets: maintaining the stability of the financial system, preserving the stability of individual financial institutions, and maximizing the return on the taxpayers’ investment.
However, the panel argued that these principles may sometimes be at odds with each other.
Jim Sinclair’s Commentary
The Good Ole Boys club and Fraternity of Banksters must prosper.
Main Street, well that is another story.
The Subsidy That Won’t Die
The big banks claim the government isn’t helping them anymore. Not exactly. Check out this little-known subsidy.
By Daniel Gross | Newsweek Web Exclusive
Jan 13, 2010 | Updated: 9:44 a.m. ET Jan 13, 2010
The big bankers are in the news again, and they’re steamed. On Wednesday, bank CEOs will testify before the Financial Crisis Inquiry Commission. Meanwhile, the industry is pushing back against plans from the Obama administration to tax large banks as part of an effort to recoup bailout costs. JPMorgan Chase CEO Jamie Dimon, bristling at criticism of his hardworking bankers, told employees: "I am a little tired of the constant vilification of these people." Wall Street’s big shots have had enough They’ve paid back their TARP money—which, some of them say, they didn’t need anyway—with interest. They’ve got the government off their balance sheets, so now the government should stop meddling with them.
But the big American banks aren’t nearly so independent as they would have us believe. JPMorgan Chase, Goldman Sachs, and their peers are still benefitting hugely from significant post-crisis subsidy programs that boost their profits. I’m talking mostly about the Temporary Liquidity Guarantee Program (TLGP). This was a program started in the wake of the Lehman Bros. collapse to deal with the fact that banks were having a tough time raising short-term capital on decent terms. Under the TLGP, the Federal Deposit Insurance Corp., which is ultimately backed by the taxpayers, would guarantee debt in exchange for fees paid by the banks issuing debt.
The TGLP was ended to new entrants in June 2009 and thus far has gone without a loss. But the fact remains: Private companies were allowed to borrow massive amounts of money—$345 billion at the peak in May 2009—on the public’s credit. At the end of the third quarter, there was still $313 billion outstanding.
Banks and financial institutions have to pay money to get money. When they pay less to borrow, it’s much easier to make profits, and they tend to borrow more of it. When they have to pay more to borrow, it’s more difficult to make money. This chart (from Bloomberg, via Zero Hedge) breaks down the TLGP borrowings of individual institutions as of Nov. 30 and the interest rates they’re paying. General Electric was the largest user, with nearly $88 billion. (Its GE Capital unit has prodigious borrowing needs.) But GE was followed by the big bailed-out banks: Citigroup ($64.6 billion), Bank of America ($44.5 billion), JPMorgan ($39.7 billion), Morgan Stanley ($25 billion), Goldman Sachs ($21.26 billion), and Wells Fargo ($9.5 billion). With the exception of Citi, the government no longer owns shares in these firms. And so they feel the government should have no say in their practices going forward.
Jim Sinclair’s Commentary
Everything economic was booming until January 1st, 2010. Well, sort of…
What still surprises me is Mark F. and Jim R. going over the hill in reverse.
U.S. Office Vacancies Climb to 15-Year High on Employment Cuts
By Dan Levy
Jan. 8 (Bloomberg) — Office vacancies in the U.S. surged to a 15-year high in the fourth quarter and rents fell the most on record as the deepest recession in more than half a century slashed demand for commercial space, according to Reis Inc.
The vacancy rate climbed to 17 percent from 14.5 percent a year earlier, the New York-based research company said. Effective rents, the amount tenants actually pay landlords, dropped 8.9 percent, the biggest year-over-year decline since Reis began tracking the data in 1980.
“Never before have landlords been under so much pressure to offer concessions to attract and retain tenants,” Victor Calanog, Reis’s research director, said in a statement. The office market won’t reach a bottom until businesses begin hiring, he said.
Initial jobless claims rose to 434,000 last week and the number of people collecting extended unemployment benefits increased to 5.44 million in the week ended Dec. 19, the Labor Department said yesterday. Payrolls have declined every month since the recession started in December 2007.
U.S. companies cut an estimated 84,000 jobs in December, more than economists forecast, ADP Employer Services said on Jan. 6. Unemployment may stay above 10 percent through the first half of 2010, according to a Bloomberg survey last month.
Jim Sinclair’s Commentary
Note how Turkey has come out of relative geopolitical obscurity placing itself in the middle of some of the most significant international potential problems.
Report: Turkey warns Lebanon that Israel may be planning attack
By Haaretz Service
Last update – 12:23 14/01/2010
Turkish Prime Minister Recep Tayyip Erdogan this week warned Lebanese leaders that Israel may be planning an attack on its northern neighbor, Lebanese sources told the London-based Arabic language daily A-Sharq al-Awsat on Thursday.
At a meeting in Ankara with Lebanese Prime Minister Saad Hariri and President Michel Suleiman on Monday, Erdogan declared that Israel was endangering world peace by using exaggerated force against the Palestinians, breaching Lebanon’s air space and waters and for not revealing the details of its nuclear program.
Erdogan called on the five permanent members of the United Nations Security Council to pressure Israel over its nuclear program in the same way that the international community has been dealing with Iran.
"Israel never denied that it has nuclear weapons," said Erdogan. "In fact, it has admitted to such."
"Those who are cautioning Iran must also caution Israel," Erdogan declared. "If we fail to display a fair attitude in this region, the problems will hit not only the region, but will spread elsewhere as well. The unrest of the Middle East is the unrest of the world."
Jim Sinclair’s Commentary
Tarp will live on for years. Of course it will because of the long term and probable eternal lack of value in most SIVs.
Government watchdog warns on TARP.
In a new report, the Congressional Oversight Panel warns TARP will leave a legacy in financial markets, with expectations that the government will always step in to rescue institutions that are "too big to fail." The report also criticized the Treasury for failing to set clear guidelines for when and how it will dispose of billions of dollars in assets. Though the $700B bailout officially ends in October, "TARP will live on for years," said panel chairwoman Elizabeth Warren, so the "Treasury must learn from the mistakes it made over the past year."
Jim Sinclair’s Commentary
The yearend dollar rally occurred because money managers agreed it should happen and quantified the unknowable size of the dollar carry trade. The problem is that this market event totally lacks any fundamental legs whatsoever.
Foreclosures hit new record.
More than 2.8M U.S. homeowners received a foreclosure notice in 2009, representing one in 45 households and setting a new record. According to RealtyTrac’s year-end report, 2009 saw 21% more foreclosures than there were in 2008, and more than double those from 2007. Despite the jump in foreclosures, home repossessions rose just 1.1% from 2008.
Jim Sinclair’s Commentary
Then adding to the subject of lack of fundamental legs for the dollar rally comes the "D" word, which is debt.
Mounting debt risks dollar crisis.
Having completed its two-year study, the Committee on the Fiscal Future of the United States has warned a dollar crisis is likely unless the government raises taxes or cuts spending to drastically rein in its debt. "In the next year or two, large deficits and more borrowing are unavoidable given the severity of the economic downturn. However, action ought to begin soon thereafter."
Jim Sinclair’s Commentary
California is the USA’s Greece
California downgraded again.
S&P downgraded California to A-minus with a negative outlook, as the state is facing another multibillion-dollar budget gap and federal help seems increasingly unlikely. However, even though it now costs more to insure California municipal debt against default than to insure bonds issued by Kazakhstan, there’s a compelling case to be made that California is doing better than the headline numbers suggest.
Jim Sinclair’s Commentary
Anything that reigns in the Crimex benefits the price of gold and silver.
The paper gold port is the harbor of manipulation that cannot be accomplished in the cash market.
Gold gains on news regulator will review limits
CFTC says it plans meeting to discuss possible limits on metal futures and options contracts
New York, London — Reuters Published on Thursday, Jan. 14, 2010 7:10AM EST Last updated on Thursday, Jan. 14, 2010 5:51PM EST
Gold (GC-FT1,143.500.500.04%) turned higher Thursday due to the dollar decline and as investors increased buying after the U.S. futures regulator said it would review possible position limits on gold and silver.
The chairman of the Commodity Futures Trading Commission said that the agency’s planned meeting in early March to discuss possible position limits on metal futures and options contracts will focus on gold and silver contracts.
Gold futures buying increased in a knee-jerk reaction to avoid possible future measures by the CFTC to rein in speculation in metals trading, dealers said.
The CFTC also unveiled long awaited proposals, as part of the Obama administration’s push to overhaul financial markets, to apply to the four most-traded energy contracts on the two major exchanges.
Spot gold was at $1,141.20 (U.S.) an ounce at 2:31 p.m. ET, against $1,137.60 late in New York on Wednesday.
Jim Sinclair’s Commentary
When I told you this would happen people had a good laugh.
Central Banks Have Been Net Purchasers of Gold Since the Second Quarter of 2009
LONDON – The latest interim Update to the GFMS Gold Survey 2009 reports that, on a quarterly basis, the official sector became a net purchaser of gold during the second quarter of 2009 and has remained so since. GFMS expects that IMF sales will augment official sector sales this year, but that modest purchases elsewhere will constrain volumes overall. The Survey estimates that net sales from the sector were down 90% in 2009 against 2008 levels, although the study does warn that estimates may be revised in the future as a result of the lag that often exists between central bank activity taking place and subsequently being identified.
The sector shifted onto the buy-side of the market during the second quarter and has remained there since. The “collapse” in net sales is largely attributable to the substantial fall in CBGA disposals; these were down by 160 tonnes from the already low level of 2008. The final CBGA year itself (ended 26th September) saw sales of just 157 tonnes, compared with the quota of 500 tonnes. The third CBGA, which followed on seamlessly from the second, has annual quotas of 100 tonnes and will accommodate any on-market sales effected by the IMF. The latest figures from the European Central Bank make very interesting reading; the weekly reports from the ECB imply that the amount of gold held in the Euro system of central banks has fallen by less than five tonnes since the start of the most recent CBGA. This is unprecedented and is a fair reflection of the changed attitudes in the official sector towards gold and its role in the international financial system, stemming both from gold’s positive price performance and from concern over asset risk, especially following the recent crisis.
GFMS is expecting official sector sales to rise this year, driven largely by sales from the IMF, unless of course a surprise buyer emerges to absorb all or part of the 191 tonnes of IMF gold that remain available for disposal. Net purchases outside the CBGA are expected to be continued, though volumes are thought likely to remain low.
The Study describes both gross sales and gross purchases and records that one interesting development was the “impressive” rise in overall purchases of gold last year. Estimated gross purchases from official sources were at the highest level since 1997 and with the exception of a very small volume from Malta, all of the identified gross purchases were from nations outside the CBGA. Published purchases included not only the Indian, Sri Lankan and Mauritian purchases of IMF gold, but also acquisitions by Belarus and Mexico; there were also a number of moderate transactions that have not been brought into the public domain.
Jim Sinclair’s Commentary
The dollar rally so universally anticipated at the end of 2009 was based on a sustained economic recovery being present in early 2010. Huh?
U.S. 2009 foreclosures shatter record despite aid
NEW YORK (Reuters) – U.S. foreclosure actions shattered all records in 2009 and will do so again this year, with unemployment and wage cuts overcoming programs to remedy failing home loans, RealtyTrac said on Thursday.
A record 2.8 million properties with a mortgage got a foreclosure notice last year, jumping 21 percent from 2008 and 120 percent from 2007, the Irvine, California-based real estate data company found.
The loan failure rate — and thus the fallout for home prices and the economy — would have been even worse without foreclosure prevention programs and loan processing delays caused by sheer volume, the company said.
In many cases loan fixes don’t stick, however, and so a new record of at least 3 million properties getting a filing is seen in 2010. Filings include notice of default, auction sale or bank repossession.
State, federal and private efforts to modify loan terms for at-risk borrowers either don’t go far enough or are expanding too late to help many struggling homeowners on a permanent basis, many industry experts and economists agree.
Jim Sinclair’s Commentary
Support from strange places politically according to CIGA Rusty Bayonet.
The Next Meltdown
The man who predicted the real-estate crash says to buy gold.
By Stephen Spruiell
January 14, 2010 4:00 AM
Bob Wiedemer is explaining to a roomful of hedge-fund investors that the end of America as we know it won’t be as bad as they think. Wiedemer is co-author of the new book Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown. Sound overblown? That’s what they said about his first book, America’s Bubble Economy, in which Wiedemer and his co-authors, his Ph.D. brother David and writer Cindy Spitzer, predicted that the U.S. residential real-estate market was overvalued and due for a crash. That was in 2006, months before the crash actually occurred. Now Wiedemer is warning people that another bu bble is about to collapse: America itself.
More specifically, it is Wiedemer’s view that the U.S. dollar will be the next bubble to burst. The government’s fiscal position, he explains, is unsustainable. America owes six times what it collects in tax revenues each year, and that ratio is projected to explode with the retirement of the baby boomers. On top of that, nearly 40 percent of U.S. debt must be refinanced each year, leaving the government highly vulnerable to rising interest rates. The Fed’s printing presses have been working overtime throughout the crisis, buying Treasuries and other securities to keep the economy afloat. This is a recipe for hyperinflation, and the New York Hedge Fund Roundtable has invited Wiedemer to this small conference room overlooking Park Avenue to tell investors how they can protect themselves from the fallout. His advice in one word: “Gold.”
Of late, it has become fashionable for the cool kids in the American media to mock conservative talkers for endorsing gold. For one thing, gold offers up a bountiful supply of admittedly hilarious punchlines involving pirates, Bond villains, and video games. (As Stephen Colbert quipped, “Did you know that if you collect 100 gold coins, you get an extra life?”) For another, some people really are “buggy” about gold. (That is, they hold some questionable beliefs about gold’s superiority over other forms of money.)
Wiedemer acknowledges that a few years ago, mentioning gold was the quickest way to lose credibility in a room full of investors, and for good reason: It doesn’t generate income, and it is not the invulnerable store of value its most fervent backers claim. But Wiedemer maintains that it is a good investment right now because its price tends to go up in response to fear, and in a hyperinflationary environment, there will be plenty of that to go around.
Wiedemer doesn’t fit into the thesis, so popular on MSNBC these days, that conservative talkers such as Glenn Beck dreamed up the gold racket as a profitable sideline to their main business of selling fear to people who “cling to guns and religion” (in Obama’s infamous formulation). He is a donor to Democratic politicians and causes, and his book contains asides on global warming and gun control that will leave liberals nodding. But he tells investors to check politics at the door and focus on the fundamentals of America’s fiscal situation. Fear will be a consequence of the popping of the dollar bubble, he says. But it won’t be the nightmarish apocalypse that some predict.
