december 2004
I told you long ago that Enron did not have as bearish a chart as the U.S. dollar, but how many really listen? The U.S. dollar chart has had so many bearish head-and-shoulder formations (all broke down, most pulled back, and all fell away) that it becomes a classic bankruptcy chart.
Another bankruptcy chart is Yukos, but this one reflects a situation where the King of Yukos thought he could out-muscle the former head of the KGB. That proved to be a really bad piece of judgment. Not only has the King of Yukos found himself in the lock-up, but this power struggle
gave birth to the "Authoritarian Free Enterprise" condition that now prevails throughout Russia.
Can a major currency go bankrupt? This is a simple question and the simple answer is, certainly, such a situation can occur if a nation deeply in debt fails to meet its obligations.
What you are hearing from China, the second largest holder of U.S. debt, Russia, and after them a host of other starters, is that not only are they not interested in buying any more U.S. debt, but these previously major buyers might be interested in lowering their positions in these items held as national bank reserves.
It is necessary for international buyers of U.S. debt to purchase no less than $46 billion of U.S. debt per month, simply for the U.S. to break even in terms of supporting its deficit position.
| Dear Friend of GATA and Gold: While you may be getting tired of news reports about dollar exchange rates, all those dispatched to you in recent days have included comments by market analysts or government officials that might have added important perspective. The Bloomberg story below is notable for quoting the European Central Bank's chief economist, Otmar Issing, as saying that central bankers shouldn't talk publicly about intervention in the currency markets. That is, the value of all the world's labor, capital, property, and savings should be determined not by any objective standard or by free markets but rather by a few unelected government officials meeting in secret and trying to accomplish their goals in ways that prevent people from understanding what is being done and why. So much for the most important "public" policy of all. These news stories about exchange rates also may be notable for establishing that central bank intervention against markets is the very premise of the world financial system, even as those in charge of the system preach markets to the proletariat. Though the financial press looks the other way rather than draw the most obvious conclusions, the central bankers are admitting that they rig or may try to rig the currency markets. Contrary to the World Gold Council's ineffectual promotion of gold as jewelry, gold is overwhelmingly a currency, and the most dangerous one, for it is (or easily could be) independent of governments, the worldwide standard with the potential to liberate individuals from expropriation by government. And if governments rig currency markets and gold is a currency, why should it be so hard to believe that governments also try to rig the gold market, openly or surreptitiously? Indeed, they've already admitted that too: "Central banks stand ready to lease gold in increasing quantities should the price rise." Federal Reserve Chairman Alan Greenspan to the House Banking Committee, July 24, 1998. But the central banks have been leasing gold in increasing quantities and the price has been rising anyway. So hold on to your metal, get some more, and join the struggle for a free market. CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ************************************************************* ECB chief economist Otmar Issing yesterday said in a speech in Berlin that "central bankers shouldn't talk in public about the topic of intervention." The ECB hasn't bought or sold its currency since 2000. > > Sweden's Finance Minister Paer Nuder yesterday said he has information that no action will be taken to buttress the value of the dollar against the euro. "I judge there isn't going to be any intervention," Nuder said. "I have information, indications that this is the case." Nuder didn't say where he got the information, in remarks confirmed by his press spokesman Dan Svanell. The comments were previously reported by Swedish news service Direkt. JPMorgan Chase & Co., Merrill Lynch & Co., Deutsche Bank AG, and UBS AG this week reduced their dollar forecasts. All four banks, which account for 34 percent of the $1.9 trillion-a- day currency market, according to Euromoney magazine, predict the record U.S. current account deficit will undermine the dollar. A wider gap means more dollars need to be converted to other currencies to pay for imports. "We are increasingly dependent upon an inflow of foreign capital," said Paul Volcker, a former chairman of the Federal Reserve, in an interview with PBS television on Nov. 24. "The problem is how long can this go on," he said. "When something happens it tends to go further than you imagined and that's the history of financial crises." |
Imagine your family needed to expand its borrowing from
international banks at a rate of no less than $46 billion
in order to make ends meet. That would be a horrible
situation, but imagine that your family could only borrow
$26 billion. Now your family is not able to service its
obligation to the amount of $20 billion. Keep that up
long enough, and the banks would become quite worried.
They would stop lending you any money, and start to sell
whatever assets they have of yours, along with anything
else that has your family's name on it.
Yes, a country can go broke. The U.S., in fact, is
already broke, but will manage as long as money flows
into its national stock market, and it can peddle debt to
the world that exceeds $46 billion per month.
Assuming management of U.S.A. Inc. continues it military
action, increases spending on anti-terrorism programs,
does in fact cut taxes, and acts in a way that invites
trade-wars, they will unquestionably drop below the $46
billion now required to keep the boat afloat. The kicker
is, that as this occurs, the need increases in the amount
required in the inflow, because of the ever-building need
for catch-up action.
Management in the U.S. has shown little interest in
back-peddling on its decision to conduct business as
usual, regardless of the conditions produced by those
acts.
The Islamic "Battle Strategy" is aimed at
bleeding a superior military force to death by the
age-old tactic, "All fall down, then get up in order
to do guerilla war another day." The strategy of
terrorism will come back onto the U.S. shores in a
low-tech form, which could be as simple as shipments of
chickens infected with bird flu, or giving volunteers
infected with this disease free vacations on Miami Beach,
courtesy of the Bin Laden Family. Have you wondered why
old diseases seem to be occurring again, even after we
thought they were eradicated?
The bottom line is that the war in the Middle East will
be fought all over the globe, as there is a supply of 1.2
billion potential volunteers. Any attempt to fall back
and curtail the enormous expense of fighting this war
will be meet by some horrible and local act of terror to
keep the fight going and costing a fortune.
As you review this, keep in mind that it is not necessary
for major nations to sell U.S. debt in order to un-float
the boat of the U.S. dollar, since simply not buying as
significantly as before will do the exact same thing. As
the inflow to the U.S. falls below $46 billion per month,
the need per month rises, and so begins the process of
drowning in debt.
The Chart of the U.S. dollar is the worst thing I have
ever seen when you consider what it represents. The IMF
and the World Bank, acting as salespeople for Washington
over many administrations, have done a wonderful job of
stuffing every central bank in the world with U.S. debt.
This is the process that ended today.
The BIS (Bank for International Settlements) knows this.
The charter of the BIS is secret. The ownership of the
BIS is strong, and in the hands of old European wealth.
The King of the Mountain is the BIS.
FROM D.L.
Gold Summary
By Jim Sinclair
You need no more arguments from me as to why gold
is going to $440, and then to $480 and above. Please do
NOT misread me. I am not looking here for a top that
means squat. What market have you ever seen that has
failed to ebb and flow, and to a degree common to each
market?
Gold, when it pays you big-time, will do it
in a vault upwards to curl your ears, with $100 to $300
per days, as it did to a degree in the 1979-1980 period.
Short-covering is an amazing thing to behold, and it will
occur, of course at the exact wrong time for the short,
but that is always the way it is.
Those gold commentators now looking for a top suffer from
madness common to the "Golden Geezers" since
the gold market lifted off $248. How about the Synthetic
Dollar short? That was the worst piece of garbage ever
laid on the gold market, yet many of you got scared to
death for no reason at all.
Gold is going to, and above, $480. I see clear sailing at
least into Christmas, and probably much longer. There is
every possibility that gold will register $529 before the
first phase completes, and a small rest common to all
long-term bull markets takes place.
Stop reading nuts who advertise themselves as 'gold
experts', and maybe once were, but now do nothing much at
all but try and call tops, thereby causing them. For a
top in gold, you must have a real bottom in the U.S.
dollar. A real bottom in the U.S. dollar is not possible
in light of the horrid (and getting worse) fundamentals
of the triple deficit, the mess in Iraq, the
misunderstanding of war in the east, and the flow of oil
still at risk from terrorist attack. Kenny's call
of $55 to $56 as the high in crude mentioned here was
dead on the mark. The next high after the coming low is
$69, but that depends on when Iran decides to burn a
little Saudi oil. Note my emphasis on a little, as
private treaties abound in the covert world of Middle
East war-making. To believe that the Saudis are totally
hostile to Iran is to have no idea of what exists at the
heart of oil politics and the rampant local greed for
power.
Many of you busted my chops when I called for gold at
$440 from $370. Do not doubt me now that all reactions
are buys as we head for $480. Plus, the PPI everyone is
talking about today is gold noise, but the dollar is the
gold driver.
Gold Community
Warning!
By Jim Sinclair
Friday, November 26, 2004, 12:14:00 PM EST
China has announced that it is considering the sale of
U.S. dollar-denominated Federal Debt held as reserves by
the Central Bank.
This comes on the heels of Russia's decision to consider
doing the same thing as a means of shifting to Euro-based
items. Keep in mind, central banks do not hold
significant dollars as dollars, or euros as euros, but
rather as debt instruments, so the reduction of dollars
in favor of other currencies mainly means the sale of
U.S. Federal Debt Instruments and the purchase of
alternative debt instruments in their place.
Mark today, November 26th, as the end of the U.S. dollar
as the reserve currency of choice.
The U.S. dollar is now trading directly on the 1995 low,
having broken down the BEARISH NECKLINE of the
Head-and-Shoulders of all time, with a measured move
between .7300 minimum and .5100 maximum.
Intervention aside, the U.S. dollar dies once we have
three closes below .8197. I would be floored if there is
no attempt to prevent this here and now, as defined by
next week. However, it is totally hopeless in my opinion,
as no intervention can stop the crash of the common stock
of the U.S.A., the U.S. dollar.
Hold gold -- your investment and insurance -- close to
your chest, and do not listen to the pea-brains that have
taken the place of the Prechterites within the gold
community, possibly costing you the opportunity of a
lifetime as they look for tops.
Gold shares will soon out-perform gold itself, as new and
more knowledgeable international investors enter the
smallest capitalized investment market on the planet,
gold shares.
Avoid those juniors and major gold companies that have
derivative risk. Do not buy the bull of "margin-free
gold derivatives" as that is such spin, and even
makes the U.S. government look like kindergarten
spinners.
Change your mortgages immediately to a fixed rate from a
floating rate. Make sure no debt you hold balloons in
2007. If you can pay down debt immediately, do it! If you
do not own real gold, it is late, but there is time to
buy some. Do not sell good, well-managed properties,
shares of gold exploration and development companies that
are free of derivative risk and have no insider
stock-option plan, or royalty gold shares with the same
criteria of excellent gold companies.
The next four years are going to be dillies.
Do not listen to gold-community nuts that spend their
time always looking for tops.