It looks like the UK is in the grip of your Formula too!!!

Best,
BT

OECD warns Britain risks ‘debt spiral’
Britain is at growing risk of a "public debt spiral" unless the Government takes "drastic" action to cut the deficit, according to the OECD, world’s leading economic institution.
By Edmund Conway
Published: 6:35PM GMT 19 Nov 2009

The Organisation for Economic Co-operation and Development said that even if Britain reduces its deficit in line with other leading nations, it will still have the rich world’s biggest deficit from now until 2017 and potentially beyond, casting serious doubt on its economic credibility.

The warning coincided with shock public finance statistics showing that public borrowing in October was 88 times what it was in the same month last year, making it likely that the Chancellor will miss his £175bn borrowing forecast this year.

The double blow is acutely embarrassing for Downing Street, coming ahead of next month’s pre-Budget report and only 24 hours after it pledged to create a Bill to halve the deficit within four years and to reduce debt every year for the coming decade.

In fact, the OECD predicted in its annual Economic Outlook, Britain’s deficit was likely to be even higher next year than this year, at 13.3pc, raising the prospect that the Government could break its own law in its very first year.

More…

Gold is the tool or mechanism for defeating a deflationary debt depression at the end of an economic cycle.  Many years of devaluation still lie ahead.

CIGA Eric

Click charts to enlarge in PDF format…

Dear Mr. Sinclair,

Per your comment:

"In the second great depression, gold companies went from relatively small to large dividend payouts.  The same will happen in the third great depression" Royal Gold Raises Common Stock Dividend 13% to $0.36 Per Share."

How about gold companies, (such as GXX) which offer NO dividend? In the second depression, did companies that had no dividends begin to offer them? Do you see that scenario playing out, or not?

Thank you,
CIGA TC

CIGA TC,

This time while enjoying unprecedented prosperity, most gold companies without derivative time bombs will pay small dividends, raising the salary and bonus of management.

This is the New Normal of the Depraved Age.

Gold companies have the greatest stockholders on the planet and generally the other end of the spectrum as management.

Jim

Jim Sinclair’s Commentary

Wall Street may be booming, but Main Street is bombing out.

Read here to see what the CIT situation means to businesses that have relied on them.

Dear Mr. Sinclair,

A brief update from the trenches.  I’ll title this "It’s getting dirty out there!".

On Monday I had a meeting with the local business development representative for our primary hardware supplier (an independent national wholesaler with annual revenue in excess of $1 billion).  The failure of the second largest independent wholesaler (reliant on CIT) gave the representatives company a boost due to new account acquisitions but business overall at existing customers is "weak". 

Our secondary supplier is a nationally recognized co-operative hardware supplier which recently announced its third quarter earnings.  The company was profitable and reduced its debt burden but its gross revenue was down by the most significant amount of any quarter in over a year.  There seems to be an acceleration of downward momentum.

In various meetings with additional sales representatives for smaller, local suppliers I have found that in general there seems to be price wars occurring.  The cost of obtaining goods directly from manufacturers has in most cases been either flat or slightly up depending on the product category but wholesalers have reduced prices dramatically in an effort to retain business and move merchandise. 

Every business must be run with a margin for profit and it appears to me that many are being forced to shrink that margin in order to beat out their competitors and remain active.  This is a dangerous game that allows only a fine margin for error and is simply unsustainable from a long term perspective.  On the other end we are being hit with higher costs for health insurance, tolls and taxes which makes this game all the more difficult.

Last week a major industrial supplier in our area filed for Chapter 11 bankruptcy and is the largest to date to do so locally that I am aware of.  October was our worst month to date this year with sales off over 25%.  November hasn’t been much better.

To this businessman the economies trajectory remains clear. I truly would like to say otherwise but I see the conditions and fear they are deteriorating further.  I know of too many businesses facing difficulties and talk to small business owners every day that are looking for ways to reduce expenditures, cut head counts and simply seek the survival of their entities.  What is taking place on Main Street in this country is truly tragic and is clearly overlooked by the political elite and their legislation. Let’s hope they wake up and realize how much we actually contribute to this nation’s economy however small we may be as individual entities.

Best Regards,
Your Friend,
CIGA Marc

I won’t even try to debate the merit of these programs.

Move over Cash for Clunkers, it’s time for "Cash for Caulkers."  Soon it will be cash for breathing…

Mr. Doerr calls his proposal, which would give households money to pay for weatherization projects, “cash for caulkers.” Rahm Emanuel, President Obama’s chief of staff, told me, “It’s one of the top things he’s looking at."

CIGA Eric

A Stimulus That Could Save Money
By DAVID LEONHARDT
Published: November 17, 2009

The one highly visible success of the stimulus program has been the cash-for-clunkers program. It induced a boom in vehicle sales this summer that clearly would not have happened otherwise.

The rest of the stimulus has created a lot of jobs — 700,000 to 1.5 million, according to economists’ estimates. But it has done so in thousands of little ways: scattered construction projects, plugged-up school budgets and the like. Politically, these measures are not popular enough to create a groundswell for more of them.

And the economy still needs help. So White House officials are looking at creating a new version of cash for clunkers — this time for home weatherization.

More…

Jim,

How long ago did we talk about this on JSMineset.com? How many CIGAs were encouraged to hold gold at the time?  At times I understand your frustration.

Similar to 2005-2006, the huge commercial short position is/will be liquidated into strength in 2009-10.

CIGA Eric

Click here to read the article…

Click chart to enlarge in PDF format

Jim,

Down the road, who or what type of gold dealer (s) do you see in the crystal ball that could turn gold into cash discreetly?  If everybody is broke due to future nightmare economic possibilities, who could cash one out?

Thanks,
CIGA Blake

CIGA Blake,

Things will be rough but not that rough. There will always be a white and black market for gold.

Jim

Jim,

The New York Fed last November created a special purpose vehicle, dubbed "Maiden Lane III"

Here are some lyrics from "Maiden Lane" by Jack O’Lent – Chestnut – Bonny Broom

"Take a hard look at me
Will you tell me dear?
What do you see?
When I look at you I’m amazed
When everything is falling down but I remain okay"

Those who remain okay are the chosen few – Banksters!

Those that fail to learn from history, are doomed to repeat it.
– Winston Churchill

Study Weimar and remember Jim and Alf’s numbers!

CIGA "The Gordon"

Dear Bernie,

Amongst the greatest good fortune I have had, it was to find myself in Tanzania in the late 80s.

The deciding factor of what country will be the leader in gold production depends to a degree on enlightened leadership. Tanzania wins hands down.

I firmly believe the leadership of Tanzania will in time be the leadership of an economic union of viable African states similar to Euroland with a singular currency and central bank.

The rise of China has taken all the attention away from the up and coming continent of Africa with a leader that has the charisma of John F. Kennedy and the brains for leadership as Einstein had for science.

The West should be a fortunate.

Respectfully,
Jim

Hi Jim,

It appears it is going to be between Tanzania and Ghana for the #1 spot in Africa!!!

I’m betting on Tanzania!

Best,
CIGA Bernie

South African gold on final deathwatch as top grade scientist finds residual gold is more than 90% less than claimed
(Excerpt from article)

The apparent bottom line in a paper published in the South African Journal of Science is that South Africa’s gold industry is on final deathwatch, despite claims of massive existing below-ground reserves. Chris Hartnady, research and technical director of Cape Town earth sciences consultancy Umvoto Africa, has found that South Africa’s Witwatersrand goldfields are around 95% exhausted, and anticipates that production rates should fall permanently below 100 tonnes a year within the coming decade.

More…

Jim,

A "pre-emptive" backstop to "solvent firms" with "sufficient collateral" – that sounds like an oxymoron to me.

If they really want to work to prevent future liquidity crises they should do exactly the opposite. Stop providing implicit taxpayer guarantees to preferential industries and increase system transparency.

CIGA Marc D

Fed Could Offer ‘Liquidity Backstop’ to Some Firms, Dudley Says
By Vivien Lou Chen and Sandrine Rastello

Nov. 14 (Bloomberg) — Federal Reserve Bank of New York President William Dudley said the central bank could curtail the risk of future liquidity crises by providing a “backstop” to solvent firms with sufficient collateral.

“The central bank could commit to being the lender of last resort” to such firms, Dudley said in a speech yesterday in Princeton, New Jersey. This would reduce “the risk of panics sparked by uncertainty among lenders about what other creditors think.”

Dudley said he’s confident regulators can create policies to reduce the risk of future liquidity runs like the ones that struck Bear Stearns Cos., Lehman Brothers Holdings Inc. and American International Group Inc. The international Basel Committee on Banking Supervision is reviewing ways to require banks to hold more and higher-quality capital, he said.

The New York Fed chief’s comments coincide with consideration by Fed officials of ways to withdraw a record $1 trillion of liquidity channeled into the financial system to avert a depression. The New York Fed said last month it’s working with market participants on using reverse repurchase agreements to drain cash from the banking system.

More…

The analysis of the worsening conditions in bank failures reveals the absolute action of the FDIC turning to the Fed and Treasury to bail out the insurer of private deposits. I therefore assume that before this is all over bank depositors will get short term non-marketable Treasury paper rather than dollars in payment.

Dear CIGAs,

The FDIC closed three more banks this past Friday, 11/13/09. As was the case last week, the details of these closings evidence some very worrisome trends.

In order to get some perspective on the state of these banks it is useful to compare the statistics of the first three banks the FDIC closed back in 2007. According to the FDIC’s 2007 Annual Report, these banks had combined assets of about $2.3 billion and combined deposits of about $2 billion. The total cost to the Deposit Insurance Fund ("DIF") of closing them was $113.2 million, about 5.7% of their combined deposits.

Turning to this week, the smallest of the three banks closed, Pacific Coast National Bank of San Clemente, CA, had assets of $134 million and total deposits of $130.9 million. The cost of closing it is projected to be $27.4 million, about 21% of deposits. This indicates it was in far worse shape than the banks the FDIC closed in 2007.

The largest closed this week, Orion Bank of Naples, Florida, had 23 branches and assets of about $2.7 billion. It had total deposits of about $2.1 billion. The FDIC projects the cost to the DIF will be $615 million, about 29% of deposits. Again, this is a staggering number when compared to the banks closed in 2007.

The statistics surrounding the third bank closed, Century Bank, FSB, of Sarasota, Florida, are downright frightening. The FDIC says this bank had total assets of $728 million and total deposits of $631 million. The projected cost to the DIF is $344 million, almost 55% of deposits. It lost more than half its customers’ deposits by the time the FDIC got around to closing it.

The total projected cost to the DIF of the three closings is $986.4 million, about 38% of their combined deposits.

This week the FDIC announced that in order to replenish the DIF it is requiring banks to pre-pay three years of premiums. This will reportedly bring the assets of the DIF up to $45 billion.

Yet if the cost of bank closings continues to increase at the pace we have been seeing, the DIF will almost certainly be wiped out again in less than a year. There is another huge wave of residential mortgage-related losses coming in 2010 and 2011 as the majority of pay option ARMs reset.

This will be exacerbated by an unemployment rate that has become staggering. To cite one piece of evidence, it was reported this week that fully 22% of mortgages in Florida are non-current.

Banks will also be hit by staggering losses on commercial real estate loans coming due in the next couple of years.

Meanwhile, under the current plan the FDIC will not receive any new premiums from banks until after 2012. Until then, the U.S. Treasury will be the FDIC’s only source of funding.

Secretary Geithner may have found it politically expedient this week to claim the cost of bailing out the financial system will be less than originally expected, but a review of the facts indicates the opposite: the cost will certainly be much higher. In light of shrinking tax revenues the only way to fund these costs will be through increased debt and unrestrained quantitative easing. Any suggestion to the contrary is pure fantasy.

Compiled and presented by:
CIGA Richard B.

Jim,

I knew Armstrong would finally come around. It is coming…

CIGA Eric

Click charts to enlarge in PDF format

Eric,

Yes, it is. It is among Alf’s higher numbers.

Regards,
Jim

Jim,

Another trading entity has had a revelation after reading the prospectus.

CIGA BJS

Touradji Buys Barrick Gold Shares, Sells Gold ETF (Update2)
By Asjylyn Loder and Rob Williams

Nov. 13 (Bloomberg) — Touradji Capital Management LP, the New York hedge-fund firm that oversees about $2.7 billion, bought 2.23 million shares of Barrick Gold Corp., the world’s biggest gold producer, while selling shares in SPDR Gold Trust, the largest exchange-traded fund backed by bullion.

Touradji’s stake in Toronto-based Barrick, valued at $84.7 million, was 82 percent of its reported equity holdings, according to a filing with regulators and data compiled by Bloomberg. The fund sold off 126,000 shares of the SPDR Gold Trust during the quarter. The trust is an exchange-traded fund backed by bullion.

“In a gold bull market, you can expect the equities to outperform gold, and in a bear market you would expect the stocks to get beat up more than the gold,” said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California. “I would say it probably means Touradji is increasingly bullish on gold.”

Barrick shares rose 13 percent to $37.90 in the third quarter in composite trading on the New York Stock Exchange. Gold rose 8.7 percent on the Comex division of the New York Mercantile Exchange. The SPDR Gold ETF gained 8.4 percent.

Armel Leslie, an outside spokesman for Touradji, didn’t respond to requests for comment.

More…

Dear BJS,

I would wager, yes, they read an ETF prospectus and nearly had a coronary.

I would have shifted to a mix of personally selected juniors, but hey, that is me.

I would look for a 30 multiple, not 2-3 multiple.

BJS are interesting initials, "Bertram John Seligman."

Regards,
Jim

There’s a lot of media coverage of pending stock market crash or correction.  Those supporting this view are suggesting selling or shorting into strength.  The following is intended to add to that discussion:

• Stocks have increasingly moved inversely relative to the U.S. dollar since 2000.  Up dollar, down stocks.  Down dollar, up stocks.
• COT money flows suggests that most bearish phase of the dollar’s primary downleg is about to begin.
• A technical review of the Up/Down As % of Total Volume Indicator, a measure of stock market breadth, and comparison with the previous corrective phase between May-July 09, suggests a new up trend is about to begin.

Click charts to enlarge in PDF format

Jim Sinclair’s Commentary

CIGA Richard B. takes a nice look back at yesterday.

Dear Jim,

On Thursday, 11/12/09, in Singapore, Secretary Geithner served up a type of MOPE that might best be described as "Say Anything." It was reported in the last two paragraphs of a Reuters piece by Glenn Somerville titled, Geithner Stresses Strong Dollar’s Global Role. The full article can be seen here…

The article primarily reported on Geithner’s statements yesterday that it’s very important to the United States to have a strong dollar, and that the U.S. carries a special burden for protecting the currency’s value because it is the global reserve currency. This has been his mantra over the course of his travels through Asia this week.

However, the jaw-dropper at the end of the article read:

"In a later interview on CNBC television, Geithner said the Obama administration needs to borrow ‘substantially less than we initially anticipated’ to bail out the financial system and said that will help get the country’s fiscal house into order.

‘That’s going to allow us to devote more to debt reduction,’ he said without offering any estimate how much less will have to be borrowed. ‘That’s a fundamentally good thing’."

Meanwhile, back in the States, the relevant economic headlines were,

-Fannie, Freddie Warn on More Losses;
-FDIC Orders Banks to Prepay $45 Billion to Rebuild Deposit Fund;
-Federal Housing Administration’s Reserve Fund Drops Below 2% Ratio Required By Congress;
-FHA’s Reserve Ratio Dives to 0.53% After "Significant" Loss;
-U.S. Foreclosure Filings Surpass 300,000 for 8th Straight Month;
-22 Percent of Florida Mortgages Non-Current;
-AIG May Tap Credit Line as Commercial Paper Expires; and
-Ambac May File Bankruptcy Soon.

Just to top things off, reports early Thursday morning read, Federal Deficit Expected to Hit $150 Billion in October, 1st Month in New Budget Year. However, by mid-day the headline became, Federal Deficit Sets October Record of 176.4 Billion.

Hopefully this $26.4 billion increase in the deficit over the course of the day yesterday did not wipe out Secretary Geithner’s projected savings from the lower-than-anticipated cost to bail out the financial system.

Respectfully yours,
CIGA Richard B.

Jim,

The following headline speaks volumes. You might not be able to sell a Maple Leaf on the street for $50, but that does not mean that everyone is clueless.

CIGA Eric

Super-rich buy gold and sell hedge funds
By Steve Lodge
Published: November 13 2009 10:42 | Last updated: November 13 2009 10:42

The investment preferences of the world’s wealthiest families have shifted significantly in favour of gold and other commodities and away from hedge funds in the wake of the financial crisis, according to a survey of family offices and advisers of the super-rich.

Two-thirds of the 100 respondents to a survey by the Family Office Channel, a new website, said that super-rich families are now more likely to invest in gold and other commodities. They are also more interested in bond investments and in holding higher amounts of cash as part of an “instinctive retreat to ultra-safe asset classes”.

By contrast, two-thirds of respondents said the wealthiest families are less likely to invest in hedge funds and structured products – investments offering capital protection – with one in three reporting “greatly reduced” interest in these holdings.

More…

Jim

The rumor about tungsten filled bars manufactured by the US has been floating around for a while. The timeline certainly makes sense. All I know is a huge scandal is coming. There is way too much demand for the limited supply of gold at current market prices.

CIGA Eric

http://www.financialsense.com/fsu/editorials/kirby/2009/1112.html

http://www.kirbyanalytics.com/

Jim,

Senior UBS AG executive Mark Branson will head Swiss regulator FINMA’s banking unit, the Swiss watchdog, by early next year. This creates a huge conflicts of interest caused by ties between the regulatory body and the banking industry.

The Swiss government had to bail out UBS in October last year as the bank ran up over $50 billion in write downs and posted the largest corporate loss in the country’s history.

I don´t recognize Switzerland anymore…

Best regards,
CIGA Christopher

UBS exec Branson joins Swiss bank watchdog FINMA
By Sven Egenter
27 October 2009 @ 08:44 am ET
By Sven Egenter

ZURICH, Oct 27 (Reuters) – Senior UBS AG (UBSN.VX)(UBS.N) executive Mark Branson will head Swiss regulator FINMA’s banking unit, the Swiss watchdog said on Tuesday, in a move likely to reignite debate over close ties between regulators and large banks.

The 40-year old Briton took over the role of chief financial officer at the troubled Swiss bank’s wealth management unit in February 2008 and FINMA said he would start in his new position and join its executive board on Jan. 1, 2010.

He will not take decisions affecting UBS for a year, during which time decisions on his former employer will be taken by FINMA Chief Executive Patrick Raaflaub.

Branson moved into the spotlight earlier this year when he testified and apologised for the bank’s breaches of U.S. law in a Senate hearing during a bitter tax row with U.S. authorities.

More…

Dear Christopher,

The champions of the Swiss Banking Industry are turning over in their graves at 9000 RPM.

What you are observing is a worldwide phenomena as finance takes over government, except in China.

This is why the Fed will not go against Wall Street.

UBS used to be one of the most conservative stars in world Banking industry.

Regards,
Jim

TLT and TBT (Double short ETF) show roughly the same deterioration in the bond market.  TLT looks weak and TBT shows building strength.  This has to make someone nervous.

CIGA Eric

Click chart to enlarge in PDF format

What goes around comes around. Justice at last

A short guy is sitting at a bar just staring at his drink for half an hour when this big trouble-making central banker steps next to him, grabs his drink, gulps it down in one swig and then turns to the guy with a menacing stare as if to say, ‘What’cha gonna do about it?"

The poor little guy starts crying.

"Come on man, I was just giving you a hard time," the banker says. "I didn’t think you’d CRY. I can’t stand to see a man crying."

"This is the worst day of my life," says the little guy between sobs. "I can’t do anything right. I overslept and was late to an important meeting, so my boss fired me. When I went to the parking lot, I found my car was stolen and I don’t have any insurance. I left my wallet in the cab I took home."

He continues, crying even harder. "Then my dog bit me. So, I came to this bar trying to work up the courage to put an end to my life. And then you show up and drink the damn poison."

Jim Sinclair’s Commentary

This is an excellent review by CIGA Richard B.

Dear Jim,

The following treasure of a news piece from the Associated Press yesterday (11/11/09) is an illustration of the MOPE principle: what you can’t control, you adopt as your own. Secretary Geithner is quoted as saying, "he’s encouraged by efforts in Japan and China to spur domestic demand instead of relying so heavily on American consumers – a shift that will contribute to more stable global growth."

Apparently, over the past couple decades Japan and China have been causing global economic instability by forcing good quality, cheaply-manufactured goods on Western consumers who were blindsided into consuming more and saving less. Therefore, the Asian countries’ shifts to domestic consumption are "an important complement to what we’re doing in the United States, as Americans save more… "

You see, the implosion of the U.S. consumer-based economy was actually well-thought-out economic policy designed to spur domestic savings and persuade Americans to consume less. Now that we’ve got Japan and China on board this policy has a greater chance of success! You can’t make this stuff up.

I was wondering when it might occur to Western thinkers that China could turn to its domestic population of 1.4 billion to make up for sales lost to the West. To better understand this turn of events we need to dust off a concept long lost to the West known as "deferred gratification." This is the idea that individuals and societies make sacrifices in the short term in order to enjoy greater benefits in the long term.

China has for several decades taken over Western manufacturing, exporting most of the fruits of its labor rather than retaining them domestically, in order to gain something it needed: manufacturing infrastructure. Now that the Western consumer is mired in debt and Western governments are in a race to debase their currencies, the Chinese are in a position to keep more and more of what they manufacture, allowing their economy to grow organically from within.

Simultaneously, they are deploying their huge foreign currency reserves to acquire raw materials on the cheap, so they have the resources lined up to fuel domestic growth. It almost seems like the fruition of a long-term plan.

I believe we have not begun to see a fraction of the damage inflicted on Western economies by the sociopathic, short-sited banksters and their control of government. Perhaps that is why we see so little rage. People really have no idea what is coming.

Respectfully yours,
CIGA Richard B.

Geithner encouraged by moves in Japan, China
By MALCOLM FOSTER
Associated Press Writer

Treasury Secretary Timothy Geithner said Wednesday he’s encouraged by efforts in Japan and China to spur domestic demand instead of relying so heavily on American consumers — a shift that will contribute to more stable global growth.

Geithner said he sees broad recognition among governments to create policies that will lead to more balanced, sustainable growth and avoid the kind of dangerous imbalances that contributed to the world recession.

"We’re very, very encouraged to see what’s happening here in terms of a broad reform agenda … to try to produce an economy more dependent on domestic sources of growth," Geithner said in Tokyo on his way to joining Pacific Rim finance ministers meeting in Singapore for the annual APEC summit.

If the world economy is to grow in a stable way, he said, "it’s going to be less driven by the American consumer. You need to see a change in the sources of growth."

Economic cooperation is expected to be a key agenda item during President Barack Obama’s visit to Tokyo on Friday and Saturday that will also address security and climate change. Japan is Obama’s first stop on an Asian tour that will take him to China and South Korea next week after attending the Asia-Pacific Economic Cooperation summit in Singapore this weekend.

More…

Jim Sinclair’s Commentary

A message for you from Dean Harry Schultz:

"This is what we mean when we keep saying: the gold rush hasn’t begun yet."

Dear CIGAs,

This is totally hysterical. Compliments of CIGA JB Slear.

Heaviest Element Yet Known to Science: (Gv)

Lawrence Livermore Laboratories has discovered the heaviest element yet known to science.

The new element, Governmentium (Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.

Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete.

Governmentium has a normal half-life of 2 – 6 years. It does not decay, but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, Governmentium’s mass will actually increase over time, since each reorganization will cause more morons to become neutrons, forming isodopes.

This characteristic of morons promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

When catalyzed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

Jim Sinclair’s Commentary

TARP to reduce the Budget Deficit is quantitative easing to infinity because they are not buying their own bonds. They are creating money to credit the budget deficits.

There has never been a more inflationary scenario in the history of currency. Trader Dan expresses his opinion on the subject at hand.

Guys,

Take a look at the following story…

I am past the point where I read in disbelief anything that this administration is capable of but this is so stupendously asinine that I could not resist sending it out.

If you sweep aside all the BS contained in the article, the crux of the matter is that these hucksters are so out of control and infatuated with their spending, that they now think it is fiscally responsible to print money into existence, saddling this plunge the nation further into debt to create the TARP program and then use the TARP money to reduce the debt and somehow can congratulate themselves for being fiscally responsible???

Once upon a time the rallying call of these drunken spenders was “raise taxes on the rich” to fund their redistributionist schemes. Now it is “raise taxes upon those who are not yet born” by destroying the currency.

With this sort of idiocy now being considered as responsible policy, gold’s target price is moving higher and higher.

White House Considers Using TARP Funds to Cut Deficit
by WSJ

Obama administration is debating whether to set a chunk of the $700 billion financial rescue aside for debt reduction.

WASHINGTON – The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program — the amount it expects to lose — to as little as $200 billion from $341 billion estimated in August.

The idea is still a matter of debate within the administration and it is unclear how much impact it would have on the nation’s mounting deficit levels. Still, the potential move illustrates how the Obama administration is trying to find any way it can to bring down the deficit, which is turning into a political as well as an economic liability.

The White House is in the early stages of considering what bigger moves it might make for next year’s budget. The Office of Management and Budget has asked all cabinet agencies, except defense and veterans affairs, to prepare two budget proposals for fiscal 2011, which begins Oct 1, 2010. One would freeze spending at current levels. The other would cut spending by 5 percent.

More…

An economics professor at a local college made a statement that he had never failed a single student before, but had failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on the present administration’s plan".

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A.

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy.

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

Could not be any simpler than that.

Bond Market:  The Historic Bull & Bear Battle
By CIGA Eric  11/10/09

The intense and historic battle between the bull and bears continues to rage in the long bond market.  It certainly looks as if the June-Oct 09 consolidation pattern has been broken to the downside.  The June 09 lows are now pulling like a magnet.  Symmetry and cycle lows imply that the neckline of the large head and shoulders formation could be tested as soon as January 2010.  The resolution of this battle will have far reaching consequences for all Americans.

Click charts to enlarge in PDF format

Hi, Jim,

I wonder if the following new junior gold fund will have the shorts a tad bit concerned.

Have a wonderful day,
CIGA Anthony

GDXJ – Welcome to the Party!
By: Adam Brochert

The Junior Gold Miner ETF (ticker: GDXJ) from Van Eck Global is now in business. Though I have a problem with putting larger silver miners in this ETF as the heaviest-weighted holdings (get info from the Van Eck website here), I will be participating. This is a good vehicle for those looking to get into the more speculative side of the Gold patch without doing all the homework. It also provides a measure of international exposure.

As Gold continues to surprise to the upside, much to the paperbugs’ dismay and astonishment, the Gold miners are likely to continue to play "catch up" to the Gold price. The all-time highs for many Gold stocks are now within reach (if they haven’t been exceeded already). I can only hope that GDXJ will catch on rapidly so that long term LEAP options will become available soon.

More…

Dear Anthony,

Unless they are brain dead it should concern them.

Regards,
Jim

Dear Chris,

The cause of the Western financial disaster is all in the OTC derivatives, and no one is going screw up the tons of money Wall Street is making in those, so please do not blow smoke.

Regards,
Jim

Chris Dodd On "Morning Meeting": We Have Financial Regulations From ‘The 19th Century’

Calling our current financial regulatory regime "more an accident than anything else," Sen. Chris Dodd (D-Conn.) appeared on Dylan Ratigan’s Morning Meeting to discuss the sweeping reform bill he unveiled yesterday.

Dodd’s bill has been called far more aggressive than the financial reform bill being weighed in the House of Representatives. Under the proposed measure, the Federal Reserve would be stripped of much of its power and in its place will be a new regulatory council to oversee systemic risks to the economy. The bill, Ratigan said, has several promising components, including crackdowns on derivatives, increasing capital requirements for banks and a clause that would allow the government to clawback pay from execs at publicly traded companies.

Here’s Dodd:

"We have an architecture of federal regulatory structure — some of it dates to the 19th century… It’s just so outdated. It’s a hodgepodge. It’s an accident more than anything else… If there’s any silver lining in the last several years of this very dark cloud in our economy it is that I think we got a chance to do what you very effectively described as [something], bold."

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A man I respect, an old African hand, wrote this great review. It is packed with the most important concepts that need now to be understood concerning why gold has only begun its bull market.

I might add that it is simply illogical to assume the Gold ETFs have all or even most of the gold they claim to have in bullion form. There simply isn’t that much gold in the gold cash market.

Size like that only trades between central banks that report their holdings. Their holding have not dropped without tracking sales enough to offset even a part of those positions.

World production versus industry off takes denies these positions.

The prospectus of the major ETF should be read as they clearly state without any question that the fund is NOT required to hold bullion gold.

Jim,

The CIGAs may find interesting some alternate non-US perspectives on where we are at, just random thoughts for the mailbox in no particular order:

1)  The investment liquidity overhang. Notwithstanding the commercial credit squeeze worldwide there are huge amounts of investable money sitting on the sidelines watching, waiting, fearful, frustrated. Whilst we see equity and other markets somewhat higher and well off their lows, volumes reflect hesitance. Much of the significant funds withdrawn from the equity markets – both private and institutional – has not yet come back into play. It sits in short term liquid instruments distrustful of what is considered a Bear rally rather than a recovery. This is substantial money, badly frightened in the downturn. The private investor also holds his liquidity out of concern at the threat posed by the deteriorating economy. However the money grows restless: interest rates are unattractive, currencies are volatile, general equities are distrusted, bonds are likely to deliver a religious experience. Gold has barely begun to reflect on the wider "public" investment horizon. When it does and even some portion of this frustrated investment capital comes to the sector… on to Alf’s numbers…

2)  Martin Armstrong. Some CIGAs may consider Armstrong’s writings as emotionally tainted by his conflict with the US Judiciary and the US State. However it comes as a shock to encounter his brilliance in the very events and influences he writes of unfolding in the markets! From theory into practice. Who would conceive of a day where respected international financial institutions advise their clients that they will no longer be offering services into the US exchanges or capital markets and that their clients should consider extracting themselves from any US investments? Quietly, but emerging publicly, it is happening! Refer Armstrong’s (and others’) writings on the Obama "green book" fiscal proposals with for eg US Estate Tax liability by non-resident non-citizen foreign investors and you see why. In the light of the UBS experience (who apparently were kind of reckless and deserved the attention of the IRS… imagine the mountain of anti-UBS litigation yet to come… ouch!) even fully-compliant institutions cannot be blamed for reconsidering doing business under ever more onerous US requirements.

3)  The timing of the above withdrawal of foreign investments could not be worse (for the US). Whilst the IRS may gain some tax dollars the US as a whole will be chasing away international investment capital in the trillions… at a time when the world doesn’t exactly appear to be queuing up to continue financing the US deficits. The US could become very unattractive to foreign capital.

4)  Flash-trading and dark pool facilities for the favoured… the arrogance of the US exchanges. That went down really well in Europe…

5)  Coming shock in Precious Metals ETFs? Gold coins and bars… the barbaric relic held in the hand represents wealth free of any encumbrance or anyone else’s liability. This is the key characteristic of physical gold: it does not represent someone else’s liability. It does not draw its worth from the strength of a transactional counterparty. Suddenly we are asked the same question by two separate Swiss brokers: How much actual physical Gold do we think the various ETFs really have? These are clever people who within their separate institutions have already reached an opinion and are testing that opinion… and here they are thinking along the lines oft expressed on JSMineset that amongst the ETFs lies the possibility of a counterparty or custodian default. All the gold is there (maybe)… or not there (maybe)… The ETFs provide a convenient trading facility but for CIGA core holdings why own something Gold that isn’t, so to speak? The small inconvenience to take delivery of your Comex or other Metal Account holdings is inconsequential should a future squeeze on physical or custodial problems occur. The risk is there otherwise these folks would not be asking the question…

6)  Finally one of my favourite perspective pieces is that from CIGA Pedro at: http://jsmineset.com/2009/05/25/in-the-news-today-204/ well worth a re-read!

As always thank you for your untiring efforts to our benefit.

CIGA Zacken

Jim,

China decided to raise prices for gasoline and diesel fuel by up to 7.2%. Inflation is coming…

Regards,
CIGA Christopher

Chinese oil-refining shares rise after fuel-price hike
By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — China’s decision to raise prices for gasoline and diesel fuel by up to 7.2%, in line with rising global crude-oil prices, boosted shares of state-owned refiners such as Sinopec and PetroChina in Shanghai and Hong Kong trading Tuesday.

The price increase of 480 yuan ($70.3) per ton was announced by the National Development and Reform Commission and translates into a 6.5% increase in gasoline prices and a 7.2% rise for diesel prices, according to Dow Jones Newswires.

Goldman Sachs’s Fred Hu on China’s Recovery

WSJ’s Jason Dean speaks to Dr. Fred Hu, managing director of Goldman Sachs Group, about the biggest challenge in China’s recovery, at the China Financial Markets conference. He also discusses what China needs to do to sustain its growth.

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China fuel price rise to add 0.12 points to Nov CPI
Tue Nov 10, 2009 7:36am IST

BEIJING, Nov 10 (Reuters) – China’s latest price hike on refined oil products will push the consumer price index up 0.12 percentage points in November, the National Development and Reform Commission (NDRC), the top economic planner, said.

China raised retail gasoline and diesel prices by 480 yuan ($70.32) per tonne from 1600 GMT on Monday. It also increased jet fuel prices by around 300 yuan per tonne. [ID:nPEK221762]

In a statement in its website, www.ndrc.gov.cn, announcing the price increase, the agency said China was not facing inflation risks for now as inventories of grains and edible oils were ample.

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Dear Christopher,

As a product of the government support for education concerning gold and silver, new China wealth will hedge their own bets in the metal.

China is embarrassed about India front running them on buying the IMF gold so they have gone into freeze frame.

Russia is now a competitor for that gold.

Something is going to happen soon. This inflation in China will be a major positive for the gold and silver price.

Regards,
Jim

This recent segment from "60 Minutes" is a must-see for anyone concerned with cyber attacks and threats to our national security.

If the power grid on the East Coast was sabotaged in a cyber attack, the ensuing chaos would make 9/11 look like mere child’s play. Our adversaries apparently have the capability and the U.S. is not even remotely prepared for such an event.

Watch the second half of this video carefully – or better yet, read the transcript. You’ve long been predicting a total collapse of the financial system based on the eventual collapse of the mountain of OTC derivatives and the sudden, violent implosion of the dollar.

My take on the latter portion of this video is that when that day arrives, the "blame" will be placed on one of our foreign adversaries rather than being directed at the real source of the problem. The sheeple will never know the difference.

Whoever predicted that mankind would ultimately be destroyed by his machines was onto something.

Best regards,
CIGA Black Swan

Cyber War: Sabotaging the System
Nov. 8, 2009

(CBS)  Nothing has ever changed the world as quickly as the Internet has. Less than a decade ago, "60 Minutes" went to the Pentagon to do a story on something called information warfare, or cyber war as some people called it. It involved using computers and the Internet as weapons.

Much of it was still theory, but we were told that before too long it might be possible for a hacker with a computer to disable critical infrastructure in a major city and disrupt essential services, to steal millions of dollars from banks all over the world, infiltrate defense systems, extort millions from public companies, and even sabotage our weapons systems.

Today it’s not only possible, all of that has actually happened, plus a lot more we don’t even know about.

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Dear Black Swan,

Those that compete with us have plans. The West has only one plan and that is bail out and make trillionaires out of the Banksters.

China will own all the natural resources. The Middle East will be getting triple figures for their oil, those that are left producing after the war.

The West has no plan for anything. The West cares more about the political show called a Health Bill than it does for national survival financially, politically and eventually militaristically.

No plan exists anywhere for anything but one thing, the Banksters becoming trillionaires.

God help us (as in serious prayer) because no one else will when push comes to shove.

That means if you are an atheist the gig is up.

Regards,
Jim

Dear LT,

It seems fitting for gold going through 1089 to 1112 with 0 days left! Next stop 1156 as it did not stop long at 1089. After that it is on to 1225.

Best,
BT

Dear Big Tatanka,

It is all happening and right on time.

Jim (LT)

Dear Jim,

Many of your readers have been educated about short-of-gold derivative clauses in the loan agreements of various gold mining companies.

How can we tell by studying company balance sheets if this pernicious form of financing is a feature of their loan agreements?

Thank you for providing your readers with this invaluable information.

Regards,
CIGA Larry K.

Dear Larry,

You ask the company if their development financing is recourse or non recourse. If it is non-recourse they have it.

Regards,
Jim

Jim,

Last night my local news mentioned gold, dollar weakness, and central bank buying of gold. First time ever! We’re on the radar…

CIGA Mad Mike

Dear Mike,

I believe contrary to the past that this is gold positive because it is the material out of which loss of dollar confidence is born on a broad scale.

Jim