A restaurant that has been used to launder money must be burnt down to keep the secret that it never had any significant number of clients. This was the case with Enron through the shredding of documents and bankruptcy.

Is it possible that the rollout of proprietary trading from major investment banks is the means of burying the mark up of OTC paper, compliments of FASB, that passed through those proprietary trading entities as enormous continuous daily trading profits?

Jim Sinclair’s Commentary

The plot thickens?

FBI escorts undersea evidence to NASA base in hunt for oil secrets

INVESTIGATORS looking into what went wrong in the Deepwater Horizon oil spill are a step closer to answers.

A key piece of evidence is now secure aboard a boat after engineers took 29 hours to lift the 15.24m-long, 300-tonne blowout preventer from 1.6km beneath the sea, and the five-storey-high device looked largely intact yesterday, with black stains on the yellow metal.

FBI agents will escort the device back to a NASA facility in Louisiana for analysis.

Crews had delayed raising the device after icelike crystals called hydrates, which are combustible, formed on it. The device could not be safely lifted from the water until the hydrates melted.

Hydrates form when gases such as methane mix with water under high pressure and cold temperatures. The crystals caused BP problems in May, when hydrates formed on a 100-tonne, four-storey dome the company tried to place over the leak to contain it.

The April 20 explosion on the Deepwater Horizon killed 11 workers and led to a massive 780 million litres of oil spewing from the undersea well.

More…

This is the seed of market expectations for Currency Induced Cost Push Inflation.

When this, a currency event, takes place, many items now viewed bearishly will make new and surprising highs.

Regards,
Jim

The risky allure of copper
CIGA Eric

As fiat devaluation intensifies (as opposed to being driven by the global recovery), the price of copper and it’s on going risky thefts are certain to increase. Predominantly copper coinage, such as 95% copper pennies, is becoming increasingly scarce in circulation. Soon you’ll be lucky to find them as transactional change.

Copper theft peaked between 2006 and 2008, before the recession hit and prices plunged to less than a dollar a pound. As the economy recovers and the demand from China grows, the price is going up again, and is now hovering around US$3.40 a pound. Few new copper mines are popping up to boost production.

Source: nationalpost.com

More…

Am I dreaming? I recall less than two weeks ago the Case Shiller Index reporting that housing prices were improving.

Sellers Cut Prices on 50% of Homes
By Sheree R Curry
Sep 3rd 2010

Homeowners are slashing prices more drastically and more frequently, according to recently released data from ZipRealty. The average price reduction is now 7.1 percent of list price.

List prices dipped about $19,000 in August compared with July, across the 26 markets studied. On average, sellers made two price cuts during that time.

Seven cities saw price reductions on more than half of their inventory, with Jacksonville, Phoenix and Minneapolis on top with 55 percent, 54.4 percent and 52.4 percent, respectively.

"Earlier in the year we saw sellers being aggressive with their pricing, but not reducing as much," says Leslie Tyler, vice president of marketing for ZipRealty. "What we are seeing now is that the trends are reversing."

With the seeming desperation of home sellers, and the continued drop in mortgage rates, buyers are in a very good position. But the plunging rate at which buyers are applying for mortgages tells a different story, which might explain sellers’ attitudes.

More…

Jim Sinclair’s Commentary

At this time these are both silver and gold coins.

It is a modest start, but a good one. The Wall Street Journal wrote a front page story on this. They kindly labelled us cultists and monetary cranks.

What else did you expect?

Islamic gold dinar gains ground in Malaysia: official

KUALA LUMPUR, Sept 4, 2010 (AFP) – Malaysians are embracing gold dinars which were introduced last month by the northern state of Kelantan to promote usage of Islamic currency as an alternative to paper money, an official said Saturday.

The gold coins and silver dirhams were introduced in early August by the Islamic opposition party PAS which rules Kelantan state to coincide with the start of the Muslim holy fasting month of Ramadan.

Umar Ibrahim Vadillo, chief executive officer with Kelantan Golden Trade, said the first batch of gold and silver coins worth two million ringgit (625,000 dollars) had been sold out in less than a month.

"There is enormous response in Malaysia. Their reaction is unbelievable," he told reporters.

"In Kelantan, businesses including garage owners and taxi drivers are using the gold and silver coins."

Civil servants in Kelantan are paid up to 25 percent of their salary in dinars and dirhams if they wish.

More…

It looks like what I had anticipated many years ago is occurring NOW!

The gold industry itself, the least knowledgeable of the gold price mechanism, has woken up to the fact that for every million ounces a junior has there is more than $1 billion in value less cost of production. The guys who dig gold out of the ground are nitwits when it comes to the price of their product. Did they not lose billions betting against themselves on short of gold OTC derivatives?

Regards,
Jim

Goldcorp to buy Andean Resources for $3.42B
CIGA Eric

Competition to acquire ounces in the ground will drive up the price of junior resource companies with good managements, properties, and locations. Fear of ownership will transition into fear of missing the next big move as merger and acquisitions, driven by lots a money chasing dwindling solid opportunities, will drive gold stocks higher in the coming months and years.

Canada’s Goldcorp Inc. said Friday it has agreed to buy Andean Resources Ltd. for about 3.6 billion Canadian dollars (US$3.42 billion), trumping a rival bid from Eldorado Gold Corp.

Source: finance.yahoo.com

More…

Eric King of KingWorldNews.com has interviewed our very own Trader Dan Norcini on the Commitment of Traders report and the Gold market as a whole. Click the link below, scroll down and click the “Listen To MP3” button on the left.

Click here to visit KingWorldNews.com and listen to the interview…

My close friend and person who has taken great care of me in Tanzania since the early 80s has authored a book.

As one of the key figures who oversaw the transformation of the country’s economy into a model for the entire African continent, his book is a must read.

If you are interested in obtaining a copy, you can email him directly at books@tancan.co.tz. I am sure he would be happy to sign it for you as well! Payment details will be provided by email.

Respectfully yours,
Jim

The accounting for trading departments would also reflect the error account and markdown of positions.

It is reasonable then to assume that the mark up of OTC derivatives due to the FASB’s capitulation would also be accounted for there. These mark ups then would be reflected as trading profits even though they are purely accounting profits.

As such, the closing down of proprietary trading departments may well reflect recent modest or negative performance in actual trading aside from paper mark ups of OTC derivatives.

Jim Sinclair’s Commentary

The OTC derivative market is alive and kicking with no meaningful changes whatsoever.

If it is free of clearing house requirements in any major financial center, it is free everywhere.

Brussels set to give way on OTC derivatives
By Jeremy Grant in London and Nikki Tait in Brussels
Published: September 1 2010 18:59 | Last updated: September 1 2010 18:59
European companies look set for a victory in their efforts to persuade regulators not to force them to use clearing houses for over-the-counter derivatives trades after the European Commission proposed that they be given exemptions from sweeping regulation to clamp down on such markets.

The move, contained in a draft regulation, comes after months of lobbying by large industrial companies like Siemens, Eon, Lufthansa and Rolls-Royce. They argued that forcing them to process their OTC derivatives trades through clearing houses would cause a huge drain on cash, possibly hurting European economic growth prospects.

Brussels is two weeks away from finalising its version of regulations in the Dodd-Frank Act agreed by the US Congress in June that clamp down on the OTC derivatives markets, parts of which were blamed for exacerbating the 2008 financial crisis.

They would force more OTC derivatives to be traded on exchanges and electronic trading platforms, and push them through clearing houses to safeguard the financial system against the fallout from a catastrophic default, such as the failure of Lehman Brothers.

A clearing house stands between two parties to a trade, ensuring completion even if one party defaults.

More…

Jim Sinclair’s Commentary

John sheds light on today’s economic figures. This is a must have (by subscription) resource.

- August Unemployment: U.3 = 9.6%, U.6 = 16.7%, SGS = 22.0% 
- August Payrolls Fall 54,000, Gain 60,000 Ex-Census Workers 
- Better-Than-Expected Payroll Changes Were Not Statistically Meaningful

"No. 321: August Employment and Unemployment"
http://www.shadowstats.com/

Jim Sinclair’s Commentary

The least publicized economic figure today.

Construction Spending in U.S. Fell Twice as Much as Forecast
September 2nd, 2010
By Shobhana Chandra

Sept. 1 (Bloomberg) — Construction spending in July fell twice as much as forecast, led by a slump in homebuilding that will depress U.S. economic growth.

The 1 percent drop brought spending to $805.2 billion, the lowest level in a decade, after a revised 0.8 percent drop in June that wiped out a previously estimated gain, Commerce Department figures showed today in Washington. Spending on federal government projects fell by the most in a year.

Builders are facing a slump in demand following the end of a homebuyer tax credit, even with mortgage rates at a record low, while mounting foreclosures will add to the inventory and further restrain prices. Government construction spending is also likely to stay weak as stimulus-linked outlays wane and state budgets shrink.

“Housing is fairly weak and construction related to the stimulus is fading,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Some commercial projects may have been delayed as businesses are uncertain about the outlook.”

Construction spending was down 11 percent in the year ended in July.

More…

Jim Sinclair’s Commentary

Like the first few banks to go broke, the increasing amount of significant cities seeking bankruptcy protection is going to grow and grow.

The most important question not answered here is WHAT chapter of the Bankruptcy Act did Harrisburg file under?

Harrisburg, Pa., defaulting on its bonds
By Aaron Smith, CNNMoney.com staff writer
September 2, 2010: 11:22 AM ET

NEW YORK (CNNMoney.com) — The capital city Pennsylvania is broke and will be skipping this month’s multi-million dollar bond payment.

On Sept. 15, Harrisburg, Pa., was scheduled to make a $3.29 million payment on the bonds it issued to build a trash plant. But, the cash-strapped city doesn’t have the dough.

"The city’s budget is in deficit," said Chuck Ardo, spokesman for Harrisburg Mayor Linda Thompson. "We’re looking for ways to trim the budget just to keep services going."

"Now the chickens have come home to roost," the mayor said in a statement released Wednesday.

In May, Moody’s knocked the rating on its general-obligation bonds three notches to B2 — five steps below investment grade. To put that into perspective: Moody’s rating on Greece’s government debt sits at A3 — still investment grade.

"It’s a warning to holders of bonds issued by financially stressed state and local governments," said John Lonski, chief economist for Moody’s Investors Services. "Credit crisis is still with us."

More…

Jim Sinclair’s Commentary

This take has significant merit regarding bailouts assuming the run on this bank continues.

They would, however, be significantly back door.

Kabul Bank Woes Spur Call For Another U.S. Treasury Bailout

Something of a bank run appears to be underway in Afghanistan as scared depositors pull their money out of Kabul Bank, or try to.

The withdrawals by Kabul Bank depositors was triggered by news that two top bank officials left the institution earlier this week as corruption allegations swirled around the bank.

The two officials were reportedly involved in unauthorized investments involving about $160 million in Dubai real estate, according to a big shareholder in the bank, Mahmoud Karzai, the older brother of Afghan President Hamid Karzai.

Mahmoud is making a suggestion that is likely to gain very little traction in Washington: he’s calling for the U.S. to bail out Kabul Bank.

An excerpt from the Washington Post which has been closely tracking the Kabul Bank story:

Action by the United States, said Mahmoud Karzai, would prevent a run on Kabul Bank and protect other banks, too. He said Kabul Bank is "stable and has money" but cannot withstand a stampede by panicked depositors.

More…

There is no way for the spinmeisters to spin this.

CIGA UD

Dear CIGA UD,

It is not even amazing anymore in how the media handles economic statistics. Everything is MOPEd away.

Regards,
Jim

Pending Home Sales Reconfirm The Housing Market is Crashing
Michael David White | Sep. 3, 2010, 9:30 AM

Record low levels of demand continue to haunt the U.S. housing market with July pending home sales re-confirming previous crash-level readings.

More…

Gloves About To Come Off For Gold Stocks
CIGA Eric

Individual gold stocks and gold stock indices are beginning to break out of long-term consolidations without much attention. The heavily followed Amex gold bug index sits above important resistance at 479.35. The gloves will come off quickly over price once the computers and hedgies start buying en mass after technical confirmation. The setup of "three taps and out" is nearly complete.

Amex Gold Bug Index (HUI):

More…

Jim,

CIGA Topsy (pictured below) and all of us on your helpful Facebook group would like to thank you for all the wisdom and light in times of confusing MOPE spin and “This is it!”

The pillars are set for $1650 and beyond to Alf and Armstrong’s numbers!

Regards,
CIGA "The Gordon"

Eric,

Let’s see what happens with the New Year’s potential of the largest tax increases in recent times.

How can you run an economy successfully based on political expediency? The answer is you can’t.

This is not the Chinese way.

Regards,
Jim

White House considers pre-midterm package of business tax breaks to spur hiring
CIGA Eric

Unless the tax breaks encourage investment over the long-term, anything along the lines of temporary tax holidays are nothing more than window dressing intended to sway voters.

With just two months until the November elections, the White House is seriously weighing a package of business tax breaks – potentially worth hundreds of billions of dollars – to spur hiring and combat Republican charges that Democratic tax policies hurt small businesses, according to people with knowledge of the deliberations.

Source: washingtonpost.com

More…

Dear Eric,

This is more smoke and mirrors. The economy is not going to get any bull traction.

The Administration is being careful with their comments today after the recent embarrassment on jobs numbers.

Regards,
Jim

Labor Market Spin Attempts to Shape Perceptions and Expectations
CIGA Eric

Companies add 67K workers, but jobless rate rises,

Private employers hired more workers over the past three month than first thought, lifting hopes for the weak economy. But the unemployment rate rose in August for the first time in four months as more people entered the market looking for work.

As headlines attempt to shape perceptions and expectations, a quick review of the data reveals that little has changed in the labor market.

The recovery, in comparison to 2004 of the 2003 to 2008 liquidity injection, remains weak. Birth/death creation as a percentage of total jobs creation remains roughly the same percentage as 2004. Total jobs created, however, are down significantly.

Birth/Death Model (BDM) Contribution to Nonfarm Net Payrolls (NFP) Added/(Lost):

In the battle to alter expectations, the jobs report is being spun as not as bad as expected. As a counter balance to this view, I submit that the weak trend in trucking and transportation, a measure of domestic and international demand, has been unable to turn positive during the recovery. This is hardly an indication of strength.

Truckers and Warehousing Payroll And YOY Change:

Also, the jobs creation/(destruction) histogram suggests that job creation barely exceeds labor force expansion on an annual basis. After the massive job losses of the past two years, it’s going to take a lot more than effectively treading water in the labor market to bring down the 15%+ real unemployment rate.

Job Creation Histogram (JCH): Net Nonfarm Payrolls Added/(Lost) less Civilian Labor Force Added/(Lost), 12 Month Average.

Source: finance.yahoo.com

More…

If it happens three times then we should examine put option activity and ex drug trade submersibles.

Offshore Oil Platform in the Gulf of Mexico Explodes
By CAMPBELL ROBERTSON and JACK HEALY
Published: September 2, 2010

NEW ORLEANS — An offshore oil platform exploded in the Gulf of Mexico on Thursday morning, injuring one worker, the United States Coast Guard said.

The platform, which was owned by the Houston-based Mariner Energy, was floating in relatively shallow waters 340 feet deep to the west of where a drilling rig leased by BP blew up and sank this spring, killing 11 people and touching off an environmental calamity.All 13 members of the work crew on board Thursday were accounted for, the Coast Guard said, though the injured worker’s condition was not immediately known.

Early reports said the crew members had all been evacuated from the platform and were flown to a hospital in Houma, La.

News reports said there was smoke rising from the platform, but it was unclear whether the rig was actively burning or in danger of foundering, or whether the explosion had set off any underground oil leaks.

The platform radioed a distress call at 9 a.m. central time on Thursday, prompting the Coast Guard to scramble seven helicopters to reach the site of the explosion, located 80 miles south of Vermilion Bay in Louisiana, said Katherine McNamara, with the 8th District office of the Coast Guard, in New Orleans.

More…

Jim Sinclair’s Commentary

They just discovered this? This has been so since the invention of the corporate form.

Study says most corporations pay no U.S. income taxes
Tue Aug 12 16:54:14 UTC 2008

WASHINGTON (Reuters) – Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.

More…

Jim Sinclair’s Commentary

Good move, but what do you think the chances are of ever seeing it here?

EU May Limit Naked Shorts of Stocks, Government Debt
By Ben Moshinsky – Sep 2, 2010 12:53 PM ET

Naked short sales of shares and government bonds may be limited by European Union proposals that say the practices cause a “disorderly market and possible systemic risks.”

Under the proposed rules, traders would be required to submit proof they can access the underlying security to settle a trade designed to profit from falling prices, according to a European Commission document obtained by Bloomberg News. The rules would need approval of the full commission before being submitted to the Parliament and national governments.

The rules would bring the EU closer to the stance taken by Germany, where Chancellor Angela Merkel banned some naked short selling in May. Merkel and French President Nicolas Sarkozy argued that some bets against stocks and government bonds should be banned as the Greek debt crisis made markets more volatile.

The proposed legislation would ban most naked short selling depending on “what you mean by naked,” said Simon Gleeson, a regulatory lawyer at Clifford Chance LLP in London.

More…

Jim Sinclair’s Commentary

The cause is simple. It is OTC derivative fraud that managed to make a disaster out of a normal four year economic contraction. That is the SOLE REASON.

There was no intervention at the cause and the OTC derivative market continues to grow.

The financial Pepto-Bismol did only one thing: make the Banksters richer than even they ever dreamed of.

Romer serves dismal for lunch. Pepto-Bismol for dessert?
By Dana Milbank
Thursday, September 2, 2010

Lunch at the National Press Club on Wednesday caused some serious indigestion.

It wasn’t the food; it was the entertainment. Christina Romer, chairman of President Obama’s Council of Economic Advisers, was giving what was billed as her "valedictory" before she returns to teach at Berkeley, and she used the swan song to establish four points, each more unnerving than the last:

She had no idea how bad the economic collapse would be. She still doesn’t understand exactly why it was so bad. The response to the collapse was inadequate. And she doesn’t have much of an idea about how to fix things.

What she did have was a binder full of scary descriptions and warnings, offered with a perma-smile and singsong delivery: "Terrible recession. . . . Incredibly searing. . . . Dramatically below trend. . . . Suffering terribly. . . . Risk of making high unemployment permanent. . . . Economic nightmare."

Anybody want dessert?

At week’s end, Romer will leave the council chairmanship after what surely has been the most dismal tenure anybody in that post has had: a loss of nearly 4 million jobs in a year and a half. That’s not Romer’s fault; the financial collapse occurred before she, and Obama, took office. But she was the president’s top economist during a time when the administration consistently underestimated the depth of the economy’s troubles – miscalculations that have caused Americans to lose faith in the president and the Democrats.

More…

Jim Sinclair’s Commentary

Except for the demonic Banksters, this will be four out of four before 2012.

POLL: Unemployment Affects Three Out Of Four Americans
First Posted: 09- 1-10 12:35 PM

Nearly three out of four Americans have been directly affected by the recession, either because they have been unemployed or know someone who has lost their job, according to a new survey.

The report, prepared by Rutgers professors Carl Van Horn and Cliff Zukin, find that 73% of Americans have either been unemployed themselves (14%) or saw an immediate family member (12%), another member of their family (30%) or a close friend (17%) lose a job.

The survey also finds profound pessimism about where the economy is headed. More than half of Americans say they believe the downturn reflects a "lasting economic change" (56%) rather than a "temporary economic downturn" (43%). Large majorities believe that the economy will remain in recession or worse a year from now.

"After suffering through the worst economic disaster most have ever experienced," Van Horn said in a statement, "American workers have diminished expectations about America’s economic future and do not have much faith that the nation’s political leaders can move the country forward."

Asked about the causes of joblessness, the survey respondents mentioned three above all: global economic competition, illegal immigration and Wall Street bankers.

More…

Jim Sinclair’s Commentary

This is a great development which we should all hope gets traction because an audit of conditions and presence would be a major moon launch on the bullish side for the price of gold.

The key to the audit must be deliverable condition.

Fox News takes Kitco’s Ron Paul gold audit story national
Submitted by cpowell on Thu, 2010-09-02 01:29
9:40p ET Wednesday, September 1, 2010

Dear Friend of GATA and Gold:

Congratulations to Kitco News and its reporter Daniela Cambone for having broken last week what this week Fox News made into a national story, the call by U.S. Rep. Ron Paul, R-Texas, for a serious audit of U.S. gold reserves. The Fox News story, broadcast and posted today and appended here, is notable for two reasons apart from calling attention to the audit issue.

First, the Fox News story quotes Paul as remarking that the audit should determine not only the simple presence of gold in the U.S. government’s vaults at Fort Knox, Kentucky, and elsewhere but also "whether any of it has been obligated."

That is, Paul is fully aware of the Federal Reserve’s involvement in gold swaps with foreign banks, an admission made by Fed Governor Kevin M. Warsh a year ago in the course of GATA’s litigation against the Fed under the Freedom of Information Act, even as Warsh insisted that the Fed’s gold swap arrangements must remain secret:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

And second, the Fox News story is notable for the refusal of the Treasury Department to comment about the gold audit issue: "Representatives from the Treasury Department and U.S. Mint did not respond to requests for comment on Paul’s proposal."

Imagine what would happen if mainstream financial news organizations began to put detailed, coherent questions to the Fed and Treasury Department about the disposition of the U.S. gold reserve, the gold swap arrangements, and the overwhelming if obscure public record of Fed, Treasury, and other U.S. government agency interest in suppressing the gold price:

More…

Jim Sinclair’s Commentary

Did you see the BBC special, "The Last Days of Lehman"? If not you certainly should!

The collapse of Lehman is what broke the chain in OTC derivatives, thereby killing the one method that existed for fixing the fraudulent OTC derivative problem. That method was Bad Derivative Bank, Good International Investment firms which could have zeroed the whole mess.

However the collapse of Lehman did bring on the OTC derivative crisis which did fix the cash flow problem of the financial industry. The flushing of Lehman also fortuitously left the majority of the distribution of TARP money in the hands of the past administration.

Lehman boss blames US for bank’s collapse

WASHINGTON — The former head of collapsed US banking giant Lehman Brothers lashed out at the US government Wednesday, claiming it could have prevented the firm’s collapse but failed to act.

Dick Fuld — who became a poster child for the ills of the banking sector — demanded to know why the government had rushed to help competitors but not Lehman, in prepared testimony for a committee investigating the financial crisis.

"Lehman was forced into bankruptcy not because it neglected to act responsibly or seek solutions to the crisis, but because of a decision, based on flawed information, not to provide Lehman with the support given to each of its competitors."

Fuld detailed measures he said could have helped save the bank and complained that "each measure was later implemented in some form for other investment banks during the days and weeks following Lehman?s bankruptcy filing."

"Had Lehman been granted that same access as its competitors… Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued."

More…

Jim Sinclair’s Commentary

Of course the ECB will remain in crisis mode. Bernanke has confirmed the same, therefore making illustration #2 below confirmed.

Illustration #2 had to be confirmed to get to illustration #3

ECB Keeps Key Interest Rate at 1%, May Maintain Crisis Mode
By Christian Vits – Sep 2, 2010 4:45 AM PT Thu Sep 02 11:45:38 GMT 2010

The European Central Bank kept interest rates at a record low today and President Jean-Claude Trichet may signal the bank will stay in crisis mode into next year.

The ECB’s Governing Council set the benchmark lending rate at 1 percent for a 17th month, as predicted by all 57 economists in a Bloomberg News survey. Policy makers are also likely to extend emergency lending measures for banks into 2011 as the risk of a renewed U.S. recession threatens the euro region’s economic rebound, economists said. Trichet holds a press conference at 2:30 p.m. in Frankfurt.

“The ECB would like to end its extraordinary measures relatively soon but the situation is still too fragile to return to the exit path before year-end,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. The euro was at $1.2828 shortly before the rate decision.

While the ECB will probably raise its growth forecasts today after Europe’s economy expanded at the fastest pace in four years in the second quarter, the sovereign debt crisis and a U.S. slowdown pose risks to the outlook. Council member Axel Weber said in an Aug. 19 interview that the ECB should help banks through end-of-year liquidity tensions before determining early next year when to withdraw emergency measures.

More…

Jim Sinclair’s Commentary

The difference between now and the 1930s is the problems is NOT simply one country or republic, but rather the entire Western World financial system.

Armstrong has made the point that trends and cycles in history repeat, but never in the exact same form.

The form here is the most dangerous of all economic history, including the fall of Rome.

International Monetary Fund Warns G7 on Debt
Published: Thursday, 2 Sep 2010 | 3:34 AM ET
By: Sewell Chan

The world’s most developed economies, which have been racking up spending since the mid-1960s, face record levels of debt as a result of the 2008-9 financial crisis and have little room for maneuver, the International Monetary Fund warned on Wednesday.

Despite the stark warning and the prospect that the wealthiest nations face years of belt-tightening, the fund also said that the risk of default by heavily indebted European countries like Greece, Ireland and Portugal had been significantly overestimated.

In three new research papers, the fund’s economists offered stern admonitions while cautioning against an overreaction.

That mix of messages was reflected in one paper on the long-term trends in the public finances of the Group of 7 economies.

The authors, Carlo Cottarelli, director of fiscal affairs, and Andrea Schaechter, a senior economist, concluded that public debt had served for decades as “the ultimate shock absorber — rising in bad times but not declining much in good times.”

More…

Jim Sinclair’s Commentary

Countries do NOT default, they reschedule debt. The currency is what defaults.

IMF ponders the improbable: Will U.S. default?
By Howard Schneider

Will the U.S. government ever default?

It’s not a pleasant thought for anyone holding some of the roughly $9 trillion in U.S. government bonds and notes currently in public hands – or for anyone hoping the global economy can stay on an even keel.

But the economists at the International Monetary Fund are paid to ponder the improbable, and in papers published on Wednesday fund staff examined where the U.S. and other developed countries fit on a continuum between easy living and disaster.

We’re farther along than you might think.

Using a concept known as "fiscal space" – basically how much latitude a country has to borrow before markets will shut off the spigot by demanding unsustainable interest rates – the IMF staff drew a bright red line through five nations it considers to be running out of room: Greece, Iceland, Italy, Japan and Portugal. Of the 23 developed nations it analyzed, four others, including the U.S., received a yellow caution flag.

Does it mean default is imminent or inevitable? Hardly – and in companion articles the fund discussed the steps being taken to control public debt, and broadly discounted the chance of an outright sovereign default among any of the advanced countries.

More…

Jim Sinclair’s Commentary

The author of this article is in harm’s way. He should contact Greg Hunter to find out what problems a reporter can have when he tells the truth.

This is another reason why the community and all its commentators should give Greg Hunter their full and unwavering support.

Widespread U.S. hiring not begun: ADP’s Prakken
Wed Sep 1, 2010 9:05am EDT

NEW YORK (Reuters) – Widespread hiring at U.S. companies has not begun as businesses remain worried about uncertainty over the future of the economy, Macroeconomic Advisers LLC chairman Joel Prakken said on Wednesday.

Prakken was speaking to a teleconference of journalists after the ADP Employer Services report on private sector employment, which his firm jointly developed. The report showed private employers unexpectedly cut 10,000 jobs last month.

Prakken said he expects Friday’s U.S. nonfarm payrolls report to be solidly in negative territory, hurt in part by the continuing evaporation of Census jobs.

Prakken said that while Wednesday’s figure was disappointing, it was not particularly surprising given other recent economic data that has suggested a slowing recovery.

More…

ABG’s trend energy, REV(E), already exceeds the highs set in May and June. This as well as the its general positive divergence with price suggests that trend energy is increasing.

African Barrick (ABG-L):

More…

Economic Soft Patch Will Be Met With Further Stimulus and Liquidity
CIGA Eric

The power up trend (PUT) in the prices paid to purchasing manager’s index ratio (PPPMIR) was broken in June 2010. This suggests the onset of another economic ’soft patch’ that will be met with further stimulus and liquidity. These injections will induce another round of fiat devaluation that will turn the ratio to the upside by 2011.

ISM Prices Paid Index (PP) to National Purchasing Manager’s Index (PMI) Ratio:

Source: www.ism.ws

More…

Jim Sinclair’s Commentary

The Shiller Index just reported the surprising increase in home prices. Their nose continues to grow.

House Prices Are Still 10% Too High, Says Barry Ritholtz
CIGA Eric

House prices relative to gold are still way too high. The U.S. dollar is a biased unit of measure, or what statisticians call a nonstationary time series. Think of it as filling your gas tank on a pump with a leaky hose. Even though the price of gas is the same as a previous fill up, the same amount of money won’t fill the tank.

The U.S. dollar median home price, while broken from up trend, appears to be consolidating. Home price in a stable, unbiased currency such as gold, paints a completely different picture. A steep downtrend that started in 2005 has broken to new lows in 2010.

All charts are updated through August 2010.

U.S. Median Home Price (MHP):

U.S. Median Home Price (MHP) to Gold 

The homebuilders to gold ratio (HBGOLDR) is on the verge of a consolidation breakdown within a steep downtrend.

S&P Homebuilders (HB) to Gold Ratio:

Ritholtz, who runs Fusion IQ and writes The Big Picture blog, says that the NAR’s happy spin is making homeowners too optimistic about the prices they’ll be able to get–thus encouraging them to price their houses too high.

In this market, says Ritholtz, houses priced realistically sell quickly. But since the majority of sellers are still dreaming of the good old days, most houses are priced too high and aren’t selling. If the NAR would stop spinning and start helping sellers get more realistic, Ritholtz says, the housing market would fix itself more quickly.

finance.yahoo.com

More…

Dear Eric,

Your price objective is somewhat stout, but quite possible if the price of gold meets Armstrong and Alf’s targets.

Regards,
Jim

Silver Attacking Important Resistance Again
CIGA Eric

Silver is attacking the all important $19.51 to $20.18 resistance zone. This zone reflects the March 2008 and October 1980 swing high and is an important line in the sand that will be vigorously defended in the paper markets. The January 1980 high magnet of 38.25 will be pulling harder once this zone is breached.

Silver, London P.M. Fixed:

As long as trend energy continues to step higher relative to price (that is, produce higher highs than previous readings at a similar price level), it’s only a matter of time before 19.51-20.18 resistance zone is breached to the upside.

Paper Silver ETF (SLV):

More…

Long Term Secular Trends in Small Cap Stocks
CIGA Eric

The long term secular trend in small cap stocks reflects devaluation through inflation. Similar to large caps, small cap stocks are bounded within a depressionary or devaluation box.

U.S. Small Cap Stocks Total Return Index (SCSTRI):

While small cap stocks outperform large caps within devaluation boxes, they underperform gold.

U.S. Large Cap Stocks Total Return Index (LCSTRI) to U.S. Small Cap Total Return Index (SCSTRI) Ratio:

U.S. Small Cap Total Return Index (SCSTRI) to Gold Ratio:

More…