Economic Collapse

Agora Financial, LLC & The Daily Reckoning interview with Marc Faber:
http://bitcast-a.v1.iad1.bitgravity.com/agorafinancial/DR/faber/indexAF.html

Jim Sinclair has an excellent analysis quoted below. Read the article “Dubai default threat rattles world stocks” as well as Sinclairs comments below.

Dear Friends,

Overnight news out of Dubai has sent global equity markets reeling and generated a safe haven flow into the US Dollar as carry trades are unwound and a flight away from risk occurs. Dubai has asked for a 6 month moratorium on its debt obligations, which for all practical purposes is a type of default. Needless to say, this came with little to no warning and has sent the markets into quite a tizzy.

Gold shot higher on the news and touched a record $1,195 before some light long liquidation connected with carry trade unwinding got underway. Look for it to be well bid on any setbacks in price as this sort of news is extremely disturbing. After all, we are talking about the financial hub of the Middle East. Imagine the repercussions that would occur should London have announced this sort of news and you can understand why stock markets were pummeled overnight.

Stocks have been floating higher and higher for the reasons described yesterday (increased profits due to expense cutting plus easy money and lots of liquidity) but this is the kind of news that could cut off all such rallies right at the knees. The reason – it creates fear and uncertainty, two of the prime ingredients in a selling binge. If Dubai could go under, then who or what might be next becomes the nagging question hanging over the markets like the proverbial sword of Damocles.

We are in a period in which we could experience price swings across the markets of the magnitude which will parallel those that we witnessed as the Japanese Yen Carry trade was unwound last year. Huge leveraged bets employing the Dollar as the borrowed currency have set up a situation in which billions of Dollars in one way bets are once again on the table. These idiots never learn as their greed will be the ruin of them all but unfortunately, it is always the innocent and those who play by the rules who get caught in the crossfire generated by the pond scum hedge fund community.

Be careful out there and be thankful that you own gold. Things are coming unraveled at an alarming speed. Just imagine the kind of losses that are now on the books of those banks who hold Dubai sovereign debt. Then again, that should not be a problem. The Central Banks can just print them some more money to replace those losses. Heaven help us all…

One of the best reads on Keynesianism vs The Austrian School of Economics, Slavery vs Liberty, Fiat paper vs Real Money, that I’ve come across in a long time: http://www.goldensextant.com/RKLSage.html#anchor1404
Read the rest of this entry »

Here is a great intervew with the legendary Marc Faber on interest rates, T-bills and currencies.

India buys 200 tonnes of Gold from the IMF for 6.7 billion US Dollars. Thats more than 7 million ounces and half of the announced IMF gold sale of 400 tonnes. Who will buy the other 200 tonnes? My bet is China. Why are they doing this? They want to get rid of their US Dollars and into hard assets. Gold is the money of kings. Debt is the money of slaves. Just look at the rate of decline in foreign purchases of US debt: Read the rest of this entry »

Reuters reports:

U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation’s banking industry are being crippled by bad loans.

The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

So another 15 billion to handle by the FDIC. They will need more funds very soon. From whom you ask? From you, dear taxpayer! This will be done through Bernankes printing press and you will pay for it through the further debasement of your currency. Trick or treat?

This is another nail in the coffin for the US Dollar.

27 October 2009 - TEHRAN - The Iranian Oil Bourse was inaugurated on Monday in the Persian Gulf island of Kish as a venue to export oil and petrochemical products.

National Petrochemical Company’s Managing Director Adel Nejad-Salim said in the opening ceremony that all petrochemical products will be gradually offered on the market, IRNA news agency reported.

The oil bourse is intended as an exchange market for petroleum, gas, and petrochemicals in various currencies, primarily the euro and Iranian rial, and a basket of other major currencies.

On February 4, 2008 the Iranian Cabinet approved the creation of the oil bourse in two stages - first for crude and second for oil byproducts transactions.

Iran, having the world’s second largest gas reserves and third largest oil reserves, is trying to play a more active role in oil and petrochemical transactions in international markets.
© Tehran Times 2009

Related to this I advice you to read the now classic article “The Proposed Iranian Oil Bourse” by economist Krassimir Petrov and also read my post about what this means and also the historic background to all this. Many things are happening pushing the once all mighty dollar further down the tube. Again, this is very bullish for gold.

Just a few minutes ago the zFact.com National Debt Clock turned over to 12 trillion USD. As you all know, the total liabilities of the US is much much higher if you take Medicare och Medicaid etc into the picture.

Compare this to the counter on the left hand side on this page.

Since the Commercial Real Estate Mortgage bubble has begun to pop with the bankruptcy of Capmark that I wrote about yesterday I thought I’d give you some background to the events unfolding before our very eyes beginning now. These mortgages are given by lenders to companies building and operating commercial buildings such as malls, offices, hotels etc. With a declining economy these companies find it increasingly difficult to pay interest on their loans as income from rents keep falling. Consider these statistics from this month of October 2009 reported by facilitiesnet.com:

U.S. Office Vacancy Rates Continue Climb, But Are Slowing
“The office vacancy rate increased, by 60 basis points (bps), to 16.1 percent, at the end of the third quarter. Although this was the eighth consecutive quarter of rising vacancy rates, it was lower than the 80-bps increase in 2Q 2009 and was the slowest pace of increase since 4Q 2008.
The national industrial availability rate increased 50 bps to 13.5 percent in 3Q 2009. This result marks the 8th consecutive quarter of rising availability. The vast majority of industrial markets experienced rising availability, with 56 out of 61 major markets showing increases from the previous quarter.”

Read the rest of this entry »