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Message: Some Jim Sinclair
February 13, 2012, at 7:00 am
by Jim Sinclair in the category General Editorial | Print This Post | Email This Post

My Dear Extended Family,

The replacement of lost liquidity is NOT arithmetic. Booms, like busts, turn geometric on their liquidity effect because of the impact of mass financial psychology. Management of Perspective Economics primarily operated by mainstream media can make the gestation period of this event long, but it cannot reverse the underlying process.

With there being no question whatsoever that a credit event is on the near horizon for Greece, there is no avoidance of a further haircut in the valuation of Greek debt held by international banks, primarily Euroland institutions. What you take away with one hand you must provide with another if the banking system of Euroland is to remain viable. As you haircut (reduce in value for balance sheet considerations) Greek debt you reduce the value of that debt held as assets of financial institutions, therein reducing their viability to borrow in order to conduct their banking activities. This mark down is in full gear as speculation advertises to the world that the next step in this Greek tragedy is a haircut of value to just 30%.

How is it possible for the Euro wizards of words to punish Greek debt severely but not hammer others equally now under assault both by mainstream media as well as the undertakers of bond ratings in the USA?

The argument takes a position that the International Swaps and Derivative Association, which is made up of the manufacturers of these devices, will not self immolate by declaring credit events to be credit defaults. This is the ultimate irreversible can kick directly into the dead end sign at the end of the road of postponement to perdition.

Financial currency inflated hell by global debt monetization is the condition from which there is no escape, except though burning down the old system and making a new one. This is the dead end sign at the end of the road for can kicking. It is the condition of financial perdition. It is not something coming in a distant future. It is here and now, clear and present, if you have the eyes to see.

The means to this end is the combination of sick sovereign debt, risk insurance issued against the default of debt without sufficient liquid capital to do so, and the fact that those entities who issued this insurance are themselves and in truth illiquid under strain thanks to the capitulation of FASB on true market value of their legacy and other assets. This is the construction of the house of financial cards that will not survive intact during the period of 2012 to 2015. This is what gold at $1700 is indicating to those unfortunate enough to understand the practical workings of a system whose life force has been stolen to a degree that can only be deemed epic.

Never in written history has anything this size occurred where trillions has been bled away from an economic system with impunity. In all history when this has occurred the then monetary system imploded, to be replaced always by a commodity based money. That is what the Retenmark was in the Weimar experience. This is what the virtual reserve currency will be that replaces the US dollar in the next three years. The commodity currency definition will be derived by a connection to the gold held by the central banks of all the currencies that make up the Western world averaged virtual currency. This virtual currency will be a computer based settlement mechanism that cannot be traded in by other than central banks on behalf of trade settlement. Each contributing nation will also contribute to a universal M3 that will be the percentage measure of gold’s value to determined percentage-wise appreciation of depreciation, constituting value of the position held by each central bank in gold. Few if any central banks need to make transactions to adjust value as the squids of the world will invent derivatives upon which to speculate on the value of gold as a product of the growth or contraction of the western world M3.

This is not by any means a gold convertible system. This is not by any means a perfect system. There will be automaticity in this system but an agreement only by members to perform as above. However this system will work the same as the Retenmark worked. When the need becomes so great to believe in something solid anything that sounds solid has and will again work.

Only a resurgence of business based on solid foundations of equity and not debt can do the final clean up and provide a door to a better future.

No politician anywhere can do the necessary without causing the explosion of the results being heard almost as a new big bang. We are going to inflate this debt away or those in power will be swept away by the violence inherent in the suffering citizen.

Gold and only those things gold will provide the bridge to maintaining a lifestyle, maintain some freedom of choice and most importantly give you options you would not otherwise have. This has been as it always has been and will continue so. The drama of the market is nothing but that – sound and fury presaging but not defining change.

Do not allow anything to deter you from holding that which will build your bridge to tomorrow safely.

I am personally 100% in. It is my intention to hold as much gold as possible lending to me leverage without borrowing or margin. What was done in the 70s cannot be done now because we are only on the cusp of the volatility in the price of gold and it is already impossible to carry leverage except in the manner I have devised for myself participated in by others. I invite you to join with me.

This is a lonely road we are on where its direction does not tend to make friends. The road to freedom of any kind never does.

Stay focused. “Non Carborumdum Est,” do not let the hateful, vengeful bashers get you down.

Respectfully,
Jim

February 12, 2012, at 3:04 pm
by Jim Sinclair in the category In The News | Print This Post | Email This Post

February 12, 2012, at 2:59 pm
by Jim Sinclair in the category Jim's Mailbox | Print This Post | Email This Post

Gold Wave & Money Flows Analysis Support Sinclair’s Assessment
CIGA Eric

The US dollar may have until June of 2012 before it replaces the euro as the currency of deep concern. Gold can continue for a period of time being played by the hedge funds but its next test is not at $1500 but rather at $2111.

I agree, Jim

The 2011-2012 D-wave decline has a window of time with a mean of March and range of December (2011) to July. Its window of price has a mean of $1530 and range of $1414 to $1680. These parameters are calculated in table 1.

Table 1: Gold’s D-Wave Analysis

The sharp decline in Gold’s DI from its second peak increases the probability that D-wave ended at $1530 on December 29th 2011 (see chart 1). That is, it likely illustrates an end to the massive transfer of paper ownership from weak to strong hands during the emotional panic of 2011 D-wave decline.

Chart 1: Gold London P.M Fixed and Gold Diffusion Index (DI)

D-wave declines are followed by A-wave advances. A-waves advances represent the first phase of distribution within larger A-B-C mark-up cycle. A-wave advances notoriously tentative and choppy are often characterized by traders as a market climbing the wall of worry.

Table 2: Gold’s A-Wave Analysis

Headline: The real terminal beginning of the Western Financial world was this week.

Kicking the can down the road is limited by the practical viability of the US dollar and US Treasury Securities market.

QE will go to infinity because there simply is no other tool that can create the amounts of liquidity required instantly by the destruction of the Western world financial system. This destruction was delivered to us via those that have securitized everything.

When you add to this that no default will be declared a default by the International Swaps and Derivative Association you have a guarantee that QE will go to infinity at the cost of the US currency market first and the US bond market second. I put this epic event in the year 2015. I give the US dollar no longer than June of 2012 before the cracks in its armor are visible to all.

The deal that set this in place happened in December when the Fed was confirmed as the lender of last resort to the entire Western financial world when it granted in excess of $500 billion in US dollar swaps to the European Central Bank. The ECB then in turn lent those funds to its member banks to buy European debt in order to paint the auctions of the European debt as viable.

At the same time the Chinese have agreed to be a port in the storm to the euro itself, explaining why it is trading above 1.30 when in truth it should be trading below 1.20 under present circumstances.

The IMF did its part in planning a large rescue package should Greek debt be haircut to 30% of its issued value. The IMF bailout fund will be dollar financed by the Federal Reserve and China. When push comes to shove the IMF bailout funds will benefit to a degree from Chinese dollars as an outsider lender that the IMF, which has already laid the ground, work for.

What will have to be rescued is the banking a system of Euroland and elsewhere holding the debt of Greece. However, what makes you think that other European nations will not demand some degree of equal treatment as the US credit rating agencies continue to downgrade European sovereign debt and the debt of their banking system.

Clearly the International Swaps and Derivatives association will see no default in the Greek credit event because it is voluntary. To declare this as such is the final can kick because it will be met by a demand for equal treatment and that will require infinite QE to hold up the world banking system. This begins a march towards 2015 when gold has a cyclical chance of being full-valued for the time being. A march has begun towards the virtual reserve currency that will have a connection to gold. This march will be toward an equilibrium price of gold and will not repeat the 1980 fall in price.

It is the funds necessary to cover the euro debt haircuts for the banks holding this debt internationally plus the ISAD Credit Event and Determination Committee non-declaration of default that guarantees QE to infinity.

The US dollar may have until June of 2012 before it replaces the euro as the currency of deep concern. Gold can continue for a period of time being played by the hedge funds but its next test is not at $1500 but rather at $2111.

The ISDA is the vehicle that will necessitate QE to infinity by its non-declaration of what is clearly default.

The clock is ticking and Alf’s numbers are in the crosshairs of the gold price. Let us hope that things do not get that bad and gold does its natural task and tries to balance the international balance sheet of the USA. That would speak very poorly for the quality of life the Banksters have planned for our grandchildren.

Gold is going to and maybe beyond Alf’s numbers. Gold shares with real growing extractable ounces will perform as they did in 1979 and 1980.

"Non carborundum est." Don’t let the bashers get you down. They are so wrong at exactly the wrong time.

Respectfully,
Jim

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