Dear Extended Family,

I believe the most important event at our Toronto CIGA meeting was the testimony of two attendees.

Two men spoke independently. One is a Canadian resident from Russia and the other from Poland.

Both said the same thing, "All the signs that preceded our inflation of more than 100% per year are here now in the West."

What more do you need to know?

Regards,
Jim

Jim Sinclair’s Commentary

Greece is a potential disaster greater than Lehman. About that there is no question.

The device of destruction is the same, OTC derivatives.

In no more than six weeks, most likely less, the EU must fish or cut bait as Greece will be out of money.

Germany can knock the most dangerous domino over if they wish can.

The failure of Greece will lead to a sovereign state domino debt syndrome that will increase the distrust of currencies and increase the demand for gold.

Bailouts will equal QE to infinity.

Either way gold remains the only currency without liabilities. It is game over either way.

Jim Sinclair’s Commentary

Ask yourself the following two questions:

1. Is California the only state of the USA that will experience bankruptcy?

2. Is Greece the only nation to have dealt in deceptive OTC derivatives?

California is a greater risk than Greece, warns JP Morgan chief
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece’s current debt woes.
By James Quinn, US Business Editor in New York
Published: 8:20PM GMT 26 Feb 2010

Mr Dimon told investors at the Wall Street bank’s annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don’t really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.

Last summer, California issued $3bn of IOU’s to creditors including residents owed tax refunds as a way of staving off a cash crisis.

"I can’t write checks without money; that’s against the law. My main goal is to keep the state afloat, but I won’t be able to do it without the help of new legislation," said Mr Chiang.

More…