Dear CIGAs,

The day the world as we knew it ended was "The Last Day of Lehman."

This disaster and disasters to come, now in process, are all based in spreads with one or more legs in OTC derivatives.

History will forget it, but OTC derivatives have already, in the final analysis, killed as many people as wars have.

Greece is no different than Iceland. Eventually the US dollar will come under the same pressure, using 40 states as the Achilles heel to kill the dollar.

Don’t for a moment assume the dollar has some granted immunity. It simply stands in line awaiting its selection while short positions in state debt are being placed.

Then what do we suppose we would find if we could actually audit the Fed’s currency swaps?
(Google translation of Spiegel Online)

"In early 2002 agreed to Greece’s debt managers and the U.S. bank GS Listen for information about a transaction in the so-called cross-currency swaps. They should in dollars and yen recorded debt to be exchanged into euro of around ten billion for a certain period and then back again. Unlike conventional swaps has been in this business working with fictitious exchange rates.

Greece was thus not the current euro equivalent of ten billion dollars or yen, but thanks to the much more favorable exchange rate, a significantly higher sum. GS gave the Greeks as an additional credit of up to an estimated one billion dollars. In the Athens of the additional debt statistics credit did not appear. The reporting rules by Eurostat, the Statistical Office of the European Union to record transactions in financial derivatives inadequate. GS to deliver to the controversial business, "no opinion". The Greek Finance Ministry did not respond to a written request."

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Jim Sinclair’s Commentary

Unless the summit meeting of planetary major central banks now taking place does not move towards what I have suggested, the euro attack will continue along with an attack on the US dollar by bashing the debt of 40 US states.

All world currencies will catapult downwards.

Your only protection against this inevitability is to sell all currencies on strength by buying gold on weakness.

If you cannot pay the price of gold then look towards those gold shares moving up the ladder of the 3 sections of 2 or 6 categories that command price.

Here is how the US dollar is open to critical attack just as the weaker euro stages are now being attacked.

Think the PIGS Are in Trouble? These 7 U.S. States Could Be Heading for Something Worse
February 06, 2010
Gregor Macdonald

The inevitable coming of the sovereign debt panic finally engulfed Europe this week as the derisively (or perhaps affectionately) named PIGS spilled their slop on the continent. But Portugal, Ireland,Greece, and Spain are hardly worthy of so much attention. In truth, they are little more than the currently favored proxies among the leveraged speculator community (cough) for the larger problem of all sovereign debt. Indeed, the credit default swaps on these smaller European satellite states were not alone this week in making large moves higher. UK sovereign risk rose strongly, and so did US sovereign risk. With a downgrade warning from Moody’s to boot.

Notable among three of the PIGS are their relatively small populations, and small contributions to either world or European GDP. While Spain has a population over 45 million, Portugal and Greece have populations roughly equal to a US state, such as Ohio–at around 10 million. And Ireland? The Emerald Isle has a population similar to Kentucky, at around 4 million. While the PIGS are without question a problem for Europe, whatever problems they present for Brussels are easily matched by the looming headache for Washington that’s coming from large, US states such as California, Florida, Illinois, Ohio, and Michigan.

I’ve identified seven large US states by four criteria that are sure to cause trouble for Washington’s political class at least for the next 3 years, through the 2012 elections. These are states with big populations, very high rates of unemployment, and which have already had to borrow big to pay unemployment claims. In addition, as a kind of Gregor.us kicker, I’ve thrown in a fourth criteria to identify those states that are large net importers of energy. Because the step change to higher energy prices played, and continues to play, such a large role in the developed world’s financial crisis it’s instructive to identify those US states that will struggle for years against the rising tide of higher energy costs.

First, let’s consider a large state that didn’t make my list. Texas didn’t make the list because its unemployment rate has not risen high enough to reach my cutoff: a state must register broad, U-6 underemployment above 15%, and currently Texas has only reached 13.7% on that measure. Also, Texas’s total energy production nearly perfectly matches its total energy consumption. Of course, Texas has indeed had to borrow more than a billion dollars so far to pay unemployment claims, thus technically bankrupting its unemployment trust fund. That meets my criteria. But, it’s instructive to note Texas’ energy production capacity in this regard, as that produces dollars. And one of the big reasons US states are under so much pressure, like their European counterparts, is that they cannot print currency. Being able to produce oil and gas is the next best thing to printing currency. So, Texas doesn’t make my list.

The seven states to make my list are California, Florida, Illinois, Ohio, Michigan, North Carolina, and New Jersey. Each has a population above 8 million people. Each has had to borrow more than a billion dollars, so far, to pay claims out of their now bankrupt unemployment insurance fund. Also, each state currently registers broad, underemployment above 15% as indicated by the U-6 measure for the States. And finally, each state is a large net importer of either oil, natural gas, electricity, or all three of these energy sources.

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Jim Sinclair’s Commentary

The East rises as the West falls.

As was said in the must see BBC special, The Last Day of Lehman, the West is f**ked and the dollar is gone.

As was said in Monty Guild’s recent report, do not confuse the future with the future of the West.

China to return to double digital growth in 2010, report
English.news.cn   2010-02-07 15:33:04

BEIJING, Feb. 7 (Xinhua) — A top Chinese think tank forecasted the nation’s economy would experience a mild rebound this year, with gross domestic product expanding around 10 percent year on year.

Among the three economic engines, investment is expected to contribute 6.3 percentage points to the GDP growth, while consumption will contribute 4.2 percentage points. Net export will drag down the growth rate by 0.5 percentage points, the Center for Forecasting Science of the Chinese Academy of Sciences said in a report issued Saturday.

The GDP may expand 11 percent in the first quarter and see a moderate slowdown in most of the remaining year, the report said.

The annual GDP growth rates for the second, third and fourth quarters are projected at 10.2 percent, 9.5 percent and 9.8 percent, respectively, it said.

Investment would continue to increase as a result of the government’s economic stimulus measures, with focuses in agriculture, transportation, and industries relating to people’s livelihood, but the annual investment growth would slow down from 30.1 percent in 2009 to 25 percent, the report said.

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Jim Sinclair’s Commentary

Interesting cover story to pander to politics.

G-7 Pledges Action to Force Banks to ‘Bear the Cost’ of Failure
February 06, 2010, 07:55 PM EST
By Gonzalo Vina

Feb. 6 (Bloomberg) — Group of Seven finance ministers said that they will agree to common rules to force banks to pay for possible failures after the financial crisis saddled taxpayers with trillions of dollars in liabilities.

Without giving details of how the plans will work, the ministers said the world’s most advanced economies should adopt common rules as long as other major countries also agree. Earlier today, a British official, speaking on condition of anonymity, said the G-7 is moving closer to an agreement on a bank insurance levy, one of a range of options proposed by the U.K. in November.

“We agreed to work together to make sure financial institutions bear the costs of their contribution” to the financial crisis, Canada’s Finance Minister Jim Flaherty told reporters after chairing two days of talks in the northern Canadian city of Iqaluit.

With government and central bank support for the global financial industry topping $11 trillion, according to the Organization for Economic Cooperation and Development, policy makers want banks to shoulder more of the costs in any future crisis. The International Monetary Fund will recommend to the G- 7 in April the best way to proceed.

As the world economy starts to emerge from the worst financial crisis since the Great Depression, the G-7 is seeking to recoup taxpayers’ funds used to prop up banks, and leaders have called for lenders to repay aid. U.S. President Barack Obama last month announced a levy on financial firms with assets of more than $50 billion.

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