The Fed as a central bank to the world Jacqueline Thorpe, Financial Post  Published: Sunday, November 02, 2008   Getty ImagesThe U.S. dollar's status as the main currency of international and central bank business has barely been tarnished by the whole sorry credit crisis. Nicolas Sarkozy may be pushing for a new financial order but Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson have beaten him to it. While the French President dreams of global economic cooperation ahead of the G20 summit in Washington, the Fed is quietly becoming central bank to the world, backed by the full might of the U.S. Treasury and a teflon-coated greenback. Last week saw a new program added to the barrage of bailouts, backstops and stimuli announced by the United States -- US$30-billion currency swap lines for Brazil, Mexico, South Korea and Singapore. This is on top of the unlimited supply of greenbacks the United States has provided to the major economies. The United States will swap wons for greenbacks, allowing South Korean banks to fulfill local demand for U.S. dollars, which had been starved by the freeze-up in the inter-bank lending markets. Banks can then provide those greenbacks to their local customers to allow them to carry out international business. In April, South Korea will swap its wons back, for a fee of course. David Rosenberg, chief North American economist at Merrill Lynch was quick to pick up on the irony. "The U.S. was supposedly the basket case nation with the massive deficits whose currency was destined to lose its reserve status and whose credit rating was going to get cut at some point," he said in a note last week. "It is the U.S. that is being called upon to provide unlimited swap lines with Europe one day, and funding for emerging markets the next." Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman in New York said the emerging market swap lines mark a new step in the evolution of the response to the credit crisis. "It underscores the U.S. leadership role and the Fed's role as defender of the system, which is increasingly broadly conceived," Mr. Chandler said. "This is something that other central banks do not seem prepared to do. Admittedly several Asian countries are talking about pooling reserves and increasing swap lines, but the role of the U.S. and the dollar are different." The U.S. dollar's status as the main currency of international and central bank business has barely been tarnished by the whole sorry credit crisis. The flight to the perceived safety of U.S. treasuries has been unstinting. The swap lines give a small "stamp of approval" to each country of their good financial husbandry but also send a message to those left swinging in the wind, Mr. Chandler adds "Being a friend of the U.S. still matters," he said. "Venezuela, Argentina, and Russia for example, are unlikely to be thought of as likely candidates for a similar swap program with the Fed. Over time, who is regarded as a friend of the U.S. may impact valuations." From a sheer tactical perspective, Europeans have missed an opportunity to push euro a reserve currency, consumed as they are with their own problems and intent on blaming the United States for the meltdown. Of course Venezuela and Russia have the oil wealth to provide their ownbailouts and to be fair, the United States was not alone last week in swinging into action. China, Norway, South Korea, Taiwan and Japan all cut interest rates, and Japan and Germany announced plans for fiscal stimulus. The Bank of England and the European Central Bank are expected to slash interest rates next week. The actions, combined with a 50 basis point cut by the Fed, which brings the world's benchmark interest rate to 1%, appear to have finally brought some rationality markets, making one wonder what there will be left for the G20 to do at its summit. Michael Gregory, senior economist at BMO Capital Markets runs down his credit crisis checklist. Provide near limitless liquidity - check. Provide capital injections to the financial sector - check. Provide a way to get rid of soured assets and/or clarity on what they're worth - check. Give a guarantee on interbank lending - check. The focus at the summit then will undoubtedly be on regulation and how to prevent a similar crises, a prospect that amuses Carl Weinberg, chief economist at High Frequency Economics "So far we haven't had any doubles," he said. "This time it was the housing market and asset-backed securities. The last time it was equity investment in Asia, the time before that it was loans to Latin America and the time before that it was S&Ls [the U.S. savings and loan crisis]. Every crisis we've had is a different set of circumstances the only common element is people tend to get irrationally exuberant about investing in a commodity and when it goes they get nailed." Many analysts are skeptical of the notion of a global regulator while Mr. Sarkozy's idea of creating a new global financial system a la Bretton Woods II - the original had a fixed exchange rate system - seems pie-in-the-sky. "The Canadian government is not willing to cede to Washington or Basel or Bombay, the right to tell its financial institutions what to do or what it's doing is wrong," said Edwin Truman, a senior fellow at the Peterson Institute for International Economics. "That does not mean one could not have an international understanding on the best way to go about financial business, supervision and regulation. That process is already under way." The Financial Stability Forum, which brings together representatives from central banks, treasury departments and regulators around the world, was set up after the Asian crisis in 1998 to do precisely that. It has already issued some 67 recommendations on the current crisis on a host of issues from capital requirements to credit rating agencies. Europe may push for something grander but Mr. Truman is wary. "If they think they're going to use this to gang up on the United States and get the United States to issue mea culpa after mea culpa and turn the supervision of our financial system over to a college of officials from the rest of G20 for the next five years, they have another thing coming," he said. Until the greenback falters, the United States is firmly in the driver's seat.

Dear CIGAs, The following article provides what I believe is a window into what the Chinese actually think in regards to the Dollar. As was pointed out by an informed reader in an earlier post this week and as Jim has long said, the East tends to speak indirectly and drop hints about their intentions and/or wishes that must oftentimes be ferreted out by those of us in the West who do not understand this mode of "diplomacy". The bluntness of this article is all the more startling for that very reason. U.S. has plundered world wealth with dollar: China paper Fri Oct 24, 2008 6:14am EDT BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies. A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said. The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper. Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis. "The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University. More...

Author: Jim Sinclair Dear Friends, 1. As we approach elections everything possible is being done to keep equities from total implosion. 2. As we approach elections everything possible is being done to keep the hollow US dollar firm. 3. As we approach elections everything possible is being done to keep gold under control to assist in keeping the dollar firm. 4. Gold is NOT a commodity. It is a currency. 5. There is an appearance of involuntary liquidation in gold as hedge and gold funds are pressed by redemptions and needs for capital to pay off investors. 6. Gold never changes. Things change in price comparison to gold, so therefore you can jump up and down on the barometer but that will not change the circumstances it is reading. 7. The means of keeping all things in check is to demoralize those whose positions oppose the goal while showing some sunshine to those who wish to keep their positions. 8. Nobody on earth can prevent the CONSEQUENCES of Chairman Bernanke and Secretary of the Treasury Paulson's attempt to offset the unavoidable CONSEQUENCES of the same actions taken by the central bank and treasury of the 1930s. 9. The different monetary action now in the degree applied will have their own and different CONSEQUENCES in the degree of economic impact. 10. The dichotomy between the bullion supply/demand picture and the easy to manipulate paper gold market continues. Pedro says: "A "friend" of mine was in Zurich yesterday. Aside from the fact that there were no gold coins available in one of the major centers of the world gold trade, it was also noted that there are no longer any large safe deposit boxes available at Credit Suisse Banhofstrasse." 11. Here is where we are headed to some degree, regardless of the manipulation of markets to paint charts at an unprecedented level.   A Tale from Weimar Germany by Roland Watson Most readers will be familiar with the great hyperinflation of Weimar Germany. Indeed, it is often held up as the icon of what can go drastically wrong when government throws off all restraint in regards to the production of fiat money. I do not need to labour the point much as to how billions and then trillions of marks were literally not worth the paper they were printed on and how workers had to be paid by the hour lest their wages rapidly lost purchasing power in the brief time between being paid and spending that same money. As ever, gold and silver proved to be safe havens from the ravages of inflation. Indeed, anything other than the mark seemed to a good place to park one's wealth. In those days, that could be anything from bedpans to US dollars to precious metals. However, depending on one's accumulated wealth, gold and silver were amongst the top assets in terms of holding and transporting wealth. Despite this, one set of figures and one notable week in the life of Weimar Germany demonstrated that one particular form of wealth proved to be in particularly heavy demand. 12. Don't let the unprecedented bullying of all markets to meet political expediency draw your attention off the ball. There are defined CONSEQUENCES to the new approach taken by the top expert of the 1929 to 1940 depression. The error is that these actions will have CONSEQUENCES different from 1930 and they will be more devastating than one can ever imagine. Monetary inflation, "the unlimited creation of fiat money," will cause massive price inflation regards of the level of business activity.   PROTECT YOURSELF!

Dear Friends, It was more of the same type of price action that we have been seeing in gold for some time now. The market is torn between continued deleveraging from speculative players on account of redemption requests from clients moving to cash versus safe haven buying.  It has been interesting reading the comments about this market in the financial press of late. The majority of gold pundits for the most part seems to be reading the same talking points which as usual are utterly and completely wrong. To hear them say it, gold as a safe haven is finished, over, kaput, pushing up daisies, swimming with the fishes, surfing its last wave, worm food, ad infinitum, ad nauseaum. What these mindless robots seem unable to grasp is that the Comex is NOT the gold market. It is a paper market which has been the recipient of large speculative buys by commodity index funds. These funds take large positions in an entire gamut of commodities based on the weightings of those particular commodities in the various commodity indices that they use as a benchmark. It some cases it might be the Goldman Sachs commodity index. In others it is the Reuters/Jefferies CRB index; it still others it is the Dow Jones Commodity Index. That means they buy gold, silver, crude oil, corn, wheat, nat gas, sugar... etc... in the same percentage terms as they are weighted in those indices. For example, if the weighting in one of these indices for gold happens to be 5%, then for every million dollars of client money invested, they are required to buy $50,000 worth of gold futures contracts at the Comex. When these funds get redemption requests from clients, who n ow want out of the commodity sector, they are forced to sell FUTURES across the board to generate the cash needed to send back to their clients. That is why, for the most part, the entire commodity complex is sinking whether it is corn or soybeans or wheat or platinum, etc. If $20 million of cash is required to meet client redemption requests, then $20 million of commodity futures must be sold REGARDLESS OF THE FUNDAMENTALS IN THAT PARTICULAR MARKET.  In other words, it is FORCED liquidation on account of redemption requests. That has NOTHING TO DO with the real physical gold market where demand remains at unprecedented levels, levels so high that it is producing serious shortages of bullion for would-be buyers. This is what is producing the increasing dichotomy between the Comex and the real gold market. I would go as far as saying that we are for all practical purposes seeing a BLACK MARKET in gold beginning to develop. Having said all that, it should still be noted however that while every single commodity futures market is in the red today on account of this forced selling, GOLD IS STILL RELATIVELY STABLE! Hey, you dimwitted pundits who keep pooh-poohing the yellow metal�s safe haven status because it is not trading at $1000, take note. Even in spite of the forced liquidation, gold is hanging in there precisely because there are enough buyers to offset a great deal of this continued forced liquidation. And this is in the arena of the futures market.  In the real world,  gold is fetching $1000 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 - $100 above the quoted spot price and certainly above the phony price quoted on the Comex. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 - $30 over the spot price. Meanwhile back in Fairy Tale land at the Comex, open interest registered a bit of an increase in yesterday�s session moving up nearly 2,500 contracts. I suspect that come this Friday, when we review the Commitments of Traders report, we are going to see increases in the fund SHORT category with a sharp drop in the fund long category alongside of short covering by the bullion banks who have been using the forced selling to cover their shorts in order to capture their paper profits allowing them to hit the metal on the next rally and do the same thing all over again. To put things in perspective about this open interest decline � we are down to levels last seen in November 2006. Let�s state this in terms that perhaps convey what I have been trying to say for some time now. NEARLY ALL OF THE SPECULATIVE INTEREST THAT HAS BEEN DRIVING PAPER GOLD HIGHER FOR THE LAST TWO YEARS HAS NOW DISAPPEARED due to this forced liquidation. This is incredible when you think about it a bit. So much deleveraging in gold has already occurred, that nearly all the buyers from the last two years are gone from this market. And yet, in spite of this, gold is still sitting above the $800 level. Back in November 2006, front month gold closed at the price of $646.90. Today, we are nearly $200 higher than that and yet nearly all of the speculative long side interest going back to that date is gone. Someone is buying gold because they see value in it and that buying has been sufficient to hold the price relatively firm compared to nearly every oth er commodity out there. What can be said about gold cannot be said about any other single commodity out there. If you doubt this, pull up the continuous price charts of corn or soybeans or platinum or copper, etc., and just look at them. Look at the chart of crude oil. Look also at the gold/crude oil ratio which has shot up strongly in favor of gold. (By the way, this alone is the reason why many of the gold mining outfits with quality mines, good management and good balance sheets are going to show some strong profits and continue to be sold down to levels that are extremely undervalued). Gold is even outperforming even longer dated Treasuries right now. To sum up, as the equity markets fall off the cliff thumbing their noses at the monetary authorities, expect further risk aversion to occur which means further forced liquidation in commodities. Watch the Euro/Yen cross and the Yen itself to get a sense of when the bulk of this will abate. The Yen as well as the Swiss Franc are benefiting from the unwinding of carry trades and will tend to be the stronger currencies out there ( along with the US Dollar) as long as the risk aversion play is in vogue.

Keep Your Guard Up Author Jim Sinclair Dear Friends, There is no hope for the future as long as we have to listen to what we have experienced in the last two days. If the Fed pays �Hold to Maturity� prices in the bailout they are accepting onto their balance sheet all the lies that existed and still exists on and off the balance sheets of the banking and investment industry. Fabrication has taken the US financial system over the cliff. The bailout of the near and dear fabricated to a spiritual level sets in cement the generational nature of this breakdown, the coming dollar collapse, and the reign of gold. To categorize this bailout of OTC derivative manufacturers as an asset purchase is so wrong it strains the limits of criminality. DO NOT LET YOUR GUARD DOWN. THE BAILOUT ONLY BUYS YOU A LITTLE MORE TIME TO PROTECT YOURSELVES. You need to distance yourself from your financial agents by: Certificating your gold and silver shares. Opting for direct registration book entry at the transfer agent for your gold and silver shares. For your retirement plan, certificate the shares in the name of your trustee and the retirement plan. The alternative is direct registration book entry at the transfer agent in the name of the trustee and the retirement account. Be sure your account at your bank is a true custodial account which is defined as an account segregated to you, away from the assets of the bank and therefore not on the balance sheet of the financial institution. I am told where the retirement shares are concerned that Charles Schwab performs this service. Many others likely do as well. The only way to be sure you really have a true custodial account is to have your attorney review the agreement between you and the institution. I have personally used the services of Jay Marcus for this of: Marcus Law Offices 2094 185th Street Suite 15 Fairfield, Iowa 52556 641-472-5945 Gold is the ultimate answer as to what currency to own. The only way gold functions as insurance is if you hold it in your own hands. ETFs do not do it. Gold shares with the real stuff properly priced will do part, but not all of it. Gold at some coin dealers, segregated or as a certificate, does not do it. If you have gold at any coin dealer or non-government mint and you want to remain that way please request their certified balance sheet. If a guarantee by some other party is there then get a copy of that guarantee for your attorney to read. The only business, as I have told you often, you should do with any coin dealer is to buy coins. Do not use margin on anything GOLD. That totally defeats the insurance principle. Respectfully yours, Jim

Have You Protected Yourself? A Review      Author: Jim Sinclair   Dear CIGAs, Have you protected yourself? If not why not? Let us review the means and ways to achieve this. Can you afford to lose everything? A few notes: A Transfer Agent is a bookkeeper for the company. Of course they have no insurance because there is nothing to insure. Even if they are owned by a financial there simply is no money held there, nor are your certificates. All that is there is a computer with your name on it. �Direct Registration� is another term for �Book Entry.� Go back to your broker, no matter how you got there, and be sure that what I have advised you in fact has occurred. No exception at all! If you have any problems contact the company in question, going as high up the chain of command as you have to go to get attention. Contact the CEO and Chairman if required. Take no back talk from any broker. The majority of them are clueless. What you read here is FACT not up for discussion. Please review the following:   Posted On: Wednesday, July 09, 2008, 3:58:00 PM EST Becoming A Book Entry On The Books Of The Transfer Agent Author: Jim Sinclair Dear CIGAs, To start, here are several definitions you should familiarize yourself with: Transfer Agent: The record keeper employed by a public corporation to prepare and maintain records related to the accounts of their shareholders. Such information would include the name of each registered shareholder, his or her address and the number of shares owned. The agent oversees the issuance of certificates to new shareholders and the destruction of certificates that have been sold. It does not matter if a transfer agent is owned by a bank or financial entity because it is a separately incorporated non-financial entity posing no financial risk to those it accounts. Street Name: A term used for describing a stock that is held in the name of a brokerage firm, instead of the actual purchaser of the stock. When you buy a stock and let your brokerage firm hold the stock certificate on your behalf, the stock is said to be held in �street name.� Nominee name: An official of a financial institution or some other appointed agent to whom securities or other funds are transferred by agreement with the actual owner. Nominees facilitate the collection and distribution of income from securities (when such securities are held in the name of a nominee), and facilitate the sale or purchase of securities when it may be inconvenient or impractical to obtain the necessary signature of the principal in order to conduct a transaction.   For additional definitions visit:   http://www.investordictionary.com http://www.investopedia.com   There are three primary forms to represent share ownership: Ownership via your account at a broker or bank in which the broker or bank holds all the shares for all clients in that share in what is called a street name. Street names today are a nominee name such as CEDE. The broker or bank then shows your ownership of this security in your monthly statement in your cash or margin account. Your shares will remain in the nominee account under the nominee name of the bank or broker in the form of a computer entry. Ownership via paper certificate whereby an entity called a Transfer Agent has been informed by your broker of your coordinates and request for the delivery of a paper certificate. The Transfer Agent follows the instructions of your broker and sends the paper certificate with your name on it to either you directly or to your broker who most often then sends it to you. The process reduces the street name position by the amount of your position. Your ownership drops off your brokerage or bank statement.  Yes it is that easy. Ownership via the form of book entry on the books of the transfer agent: Instruct your bank or broker that you wish your shares to be in the form of a book entry at the transfer agent. Your broker then instructs the Transfer Agent of your request, giving them all your information. The transfer agent reduces the street name position by the amount of your holdings and puts your name in their books as a book entry. You now fall off the books and records of the bank or broker. If you prefer method 2 or 3, all that is required is for you to instruct your broker or bank of your wishes.   If their eyes glass over in a blank stare or they say �WHAT?� you do the following: Call the company you are a shareholder of and ask the name and coordinates of their transfer agent. If they say they have none and are totally automated you are out of luck. This is rare but growing. You call the transfer agent telling them of your broker�s rank ignorance. Ask them how to instruct the broker so that your needs are met and met promptly. Call your ignorant broker or bank back and tell them you spoke to Mr./Ms. Whomever at the transfer agent and you wish them to inform Mr./Mrs. Whomever of your wishes. Note: Retirement accounts:  There is one more alternative that may help the retirement account holder, but will certainly protect the investor who is concerned over the financial health of your financial agent holding your investments. Monty Guild wrote the following excerpt in early April of this year: "REMINDER--HAVE YOU CHECKED THE SAFETY OF YOUR CUSTODIAN?  HAVE YOU CAREFULLY READ THE LANGUAGE OF YOUR CUSTODIAN'S AGREEMENT WHICH GOVERNS THE DISPOSITION OF YOUR ASSETS IN THE CASE OF SERIOUS FINANCIAL PROBLEMS IN THE WORLD ECONOMY, OR WITH THE CUSTODIAN ITSELF?   In our opinion, all investors and all recipients of pension plans or holders of IRAs should check the financial stability of the custodians of the assets that they own.  Equally important, is the legal wording of your relationship with your custodian. Have your attorney look over the wording and make sure that the custodian is segregating your assets and will audit your assets annually to make sure that they are segregated from other clients and from the assets of the firm itself.   We have spent money on attorneys who review the legal language in our custodial agreements, as we believe that it is essential knowledge.  We are money managers, not attorneys. Please have an attorney look over the legal language of your relationship with your custodian...what you find may surprise you."     Jim Sinclair�s Commentary I have personally used: Marcus Law Offices 2094 185th Street Suite 15 Fairfield, Iowa 52556 641-472-5945 641-472-5404 fax I have no direct or indirect financial relationship with this firm or anyone associated with it in any way.   Info on getting IRA Accounts Certificated: Posted On: Monday, July 14, 2008, 9:33:00 PM EST Receiving Share Certificates For Stocks In An IRA Without Being Penalized Author: Jim Sinclair Dear Jim, The message below was posted last night on the CometGold Forum at http://www.ContraryInvestorsCafe.com. It gives instructions on how to certificate shares in an IRA account. The only kicker is that the certificates themselves must be held in the safe at your broker, but it creates true custodialship and helps fight the shorts. Best regards, CIGA Tom Here is what I have done for ABC shares I own in an IRA: I am using Charles Schwab. For all my ABC Inc. shares I requested a stock certificate in the name of Charles Schwab, for the benefit of "My Name". Then I instructed them to hold the stock certificate in safekeeping (their safe). They charge me $50/year per certificate for this service. Once CS told me it was taken care of. I called the Corporate Secretary at the company in question and she confirmed that my ABC certificate number showed up on the company records. She also confirmed the way the certificate read and the number of shares. I did not request it, but the transfer agent also sent me a notice that a certificate was issued as well. I can tell you when I made the request of CS earlier this year their first response was that they could not do this for shares in an IRA. I told them that it was in fact possible, correct and legal as advised by my counsel. It took some time but they were able to get it done.     Jim Sinclair�s Commentary Method #2 in the example given above is to request direct registration book entry naming the trust entity and the IRA account. That affords protection in a financial way, as does a two-signature checking account. It is satisfactory. As the quote above infers, forget about returns on money and focus on Getting Your Money Returned. In the final analysis GOLD is the only Honest Money and Gold is the Money of the People, certainly not dollars. Power to gold and to the people!   CIGA Green Hornet asks us all to go to this link and listen to the interview. I, as well, respectfully ask that you do. It is quite important TODAY! Click here to view the interview... http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/09/15/bcnbank115.xml

Posted On: Monday, September 15, 2008, 3:01:00 PM EST In the News Today      Author: Jim Sinclair   Dear CIGAs, This is an important piece and should be referenced to my Friday posting (scroll down to "A Key Missing Fact of the Crash of 1907") about Jesse Livermore who in this case represents the naked short seller. JP Morgan represents Paulson, Bernanke and Cox. The mechanism to break every bank and financial entity resides in OTC derivatives that are presently in place. And the means to create a run on every financial entity on the planet is naked short selling.  To quote from the Friday posting: �Short selling in 1907, although commonly done, was illegal. JP Morgan knew that unless the major short sellers could be neutralized the crash of 1907 would have broken the nation - if not the world. The key difference between the crash of 1907 and the collapse of 2007� 2011 is that for some reason the opposite has occurred. If Jesse Livermore were the top gun of all hedge fund managers on the planet today his meeting with today�s JP Morgan would give him a free pass to wreak hell and mayhem. Because the key criterion in the comparison of 1907 to 2007� 2011 has been missing, this nation if not the world haven�t a snowball�s chance in hell.� SEC Preparing Rules Against Manipulative Short Sales (Update1) By Jesse Westbrook and Edgar Ortega Sept. 15 (Bloomberg) -- The U.S. Securities and Exchange Commission will likely stiffen rules targeting manipulative short selling after a stock-market rout triggered the bankruptcy of Lehman Brothers Holdings Inc., a person familiar with the matter said. The SEC may strengthen rules this week by requiring brokers to deliver shares that have been sold short, according to the person, who declined to be identified because the plans aren't complete. The SEC also will consider it securities fraud when short sellers deceive brokers about their intention to deliver shares to buyers, the person said. The SEC doesn't plan to revive an ``emergency'' order that expired last month aimed at curtailing so-called naked short- selling in Lehman, Fannie Mae, Freddie Mac and 16 securities firms. The rule required investors betting on a decline in stock prices to arrange to borrow the shares before completing a sale. ``The emergency order was mostly a symbolic action,'' said James Angel, a finance professor at Georgetown University in Washington who studies short-selling. ``I see no evidence that there was rampant naked short-selling in those particular stocks.'' SEC spokesman John Heine declined to comment. More...   Comment HR 6690  It usurps and makes redundant the Federal Reserve, the US Treasury and the emergency edicts of the Presidency. These powers are not likely to be given up easily.  First, the repeal of the Federal Reserve Act of 1913 would be necessary.  The implied action of monetary contraction as dictated indirectly by the legislation would trigger a worldwide financial collapse of an unprecedented proportion even  when compared to the 30s. The only way gold can be stabilized is if gold is fixed at a price where the US is willing to sell all and buy all. Is gold today valued at $35? No it isn't. Valuation prices without buy all/sell all means totally nothing. With this legislation that plays to their constituencies, replacing the Federal Reserve by this legislation suggests the broad monetary base would more likely double than contract. Kitco's Mr. Nadler exhibited quite a sense of humor when he published his well intentioned but totally misleading missive on a Friday wishing you all a PLEASANT WEEKEND.   Jim Sinclair�s Commentary The dollar will trade at .62 and .52. Gold will trade at $1200 and $1650.

'The US dollar is in trouble' SMART TALK: Jim Rogers Jitendra Kumar Gupta / Mumbai September 15, 2008, 0:04 IST Legendary investor Jim Rogers is probably the last word when it comes to investments in commodities. Along with George Soros, he co-founded the Quantum Fund in 1970. The fund went on to deliver absolute returns of 4,200 per cent in the decade that followed, while the S&P 500 delivered only 50 per cent during that period. Rogers correctly predicted China's resurgence as an economic superpower way back in the 80�s and that crude oil will touch the $100 mark. His last two books, �A Bull in China: Investing Profitably in the World's Greatest Market� and �Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market� have been well received. Rogers was in Mumbai on the occasion of the launch of the Birla Sun Life Commodity Equities Fund. At the conference and in an interview with Jitendra Kumar Gupta, he shared his outlook on commodities and the world economy. Excerpts: How can one identify the start of an upward or downward cycle in any commodity? In the late nineties, when I came with the conclusion that the commodity bear market is ending, I could see that no body has build offshore drilling rigs and tugs since 1981, with drilling declining for 15-20 years. I could also see that the inventories of food, which were very high in the mid-eighties, had gone down to nothing. There was no production or capacities added for decades. I travelled around Asia, enough to know that Asia was booming, so could see that this was all coming together. And, if this is all coming to an end over the next 10-15 years, I will also be able to see the upturn in the commodity cycle. I tried and looked at the big picture for the demand and supply, and some time I get it right. It is the same for the down cycle like during 1999-2000, you could see that everybody in the world was investing in stocks. You walk down the street, the TV sets were all blaring in the bars, in the barber shops, talking about the stock markets. I went to a dentist, and the receptionist was asking me about stocks, whether she should buy Coco Cola or not. So, you recognise, the signs of top to bottom markets always look the same, everybody seems to be terribly involved. What is your view on global economy and inflation? The world economy is in recession and the inflation is going to stay here, it is going to get worse. Some countries lie about it. But, inflation in all countries is going to get worse. The next decade is going to see lot more inflation, which is not good. In this light, how can one beat inflation and generate higher inflation-adjusted returns? Commodities are the best inflation hedge, better than real estate better than anything else. Nothing can assure you better than commodities, but only if you are good at it. You have to pick the things that go up the most to make more money. Inflation does not cause prices to rise, price rise causes inflation. Frequently, since the prices of the commodities go up before the inflation numbers, one can stay ahead of inflation. But, if you get it wrong you might do worse. So, investing in those commodities, which are going to go up first or selecting the right commodities, is the key to stay ahead of the inflation and make a lot of money. What is you view on commodity prices being influenced by investor/speculative money? If you do not allow the commodity prices to go up you do not get more supplies, then the farmers are not going to produce, so how are we going to get more food. Are we ourselves going to get into the fields? So, the way is to let prices go up. Do you think Asian economies are decoupling from the rest of the world? If you deal with the largest economy you are going to get affected by what is happening in America. If you are in the other sectors in Asia, such as water treatment and agriculture you have decoupled. You do not care what is happening in America. But, if you sell to Wal-Mart, which is the largest retailer in America, you are going to suffer badly. So, some will decouple and some may not. Since India is such a closed economy, which is a negative as far as I am concerned, in this particular short term, India will suffer less probably than other countries which are more integrated with the world economy. What is your view on the dollar? Fundamentally, dollar is a terribly flawed currency. I am pessimistic about the future of the dollar; I expect it to continue to deteriorate over the next two or three decades. The dollar is rallying at the movement because there are so many pessimists including me. But, I hope to use that rally some time in next year to get better of rest of my dollars. I do not want to own any US dollar. Also, I would not urge you to buy US dollar. Dollar is going to loose its status as world reserve currency. Some of the OPEC countries have already started and no longer take dollar, like Venezuela no longer accepts dollar. Other countries, like Gulf, are already looking and may be taking a package of basket of currencies instead of dollar. I am not the only one who knows the dollar is in trouble. Anybody who watches the TV knows that the dollar is in trouble. What is you assessment of the crude oil prices in the short and longer term? I do not have idea as to where the oil prices are headed in the short to medium term. I do know over the course of the bull market, which perhaps has another 10 years to go, the crude oil price will be much higher. Your bets in the commodity space? Agriculture is one thing I will be looking for the next decade or so. Within commodities, I would not say these are the best, but may be sugar, coffee and cotton. I am also starting to look at some of the base metals they are down a lot; starting to look at some of these like silver, copper, zinc and gold. Also, if you want to invest in Asia, commodities are the best way. Because, no matter what happens, the commodities have to be better, Asia has three billion people and is now involved in the world economy. Besides, in commodities you do not have to worry about corporate governance, central banks, unions, politicians or anything. With gold prices correcting, do you still advocate buying gold? I am trying and want to buy some gold. However, whether this is the low in the gold, I have no idea, but if gold goes lower, I will add some more. Gold is something I do not plan to sell. Gold is something I will gift to my children. How will alternative fuels play? Many politicians around the world are advocating bio fuel now. It is going to happen whether it is good or bad. There is going to be much more demand for the bio fuel going forward. This is also a reason that I am optimistic about the outlook of agriculture. Your views on the water potential in Asia? India and China have huge water problems. Water could be the next big investment. And, the best way is to invest in water companies which clean it, transport or pump it. Find the water companies that solve the water problem and you could be the richest person in India.

Before getting into today�s spastic behavior of markets certain things need to be said: �The USA as the major power in OTC derivative manufacturing and distribution has the largest credit lockup problem of any economic area in the world.�    1. The USA and to a lesser degree the rest of the West�s financial system is broken like a shattered eggshell. It will be lied about, covered up, hidden after Fridays and rescued only when you are not looking. It will be labeled anything but the the bailout it is. All of that is a rehash of what got us here in the first place. It does not have even a small chance of fixing the problem for even a short period. 2. Because the financial system of the USA is broken to a much larger degree than that of any other country on the planet, the US dollar has limited ability to rally regardless of the arguments being blasted out by Financial TV and all who make their living as purveyors of paper so-called assets casting your attention to competitive levels of economic activity away from the real why of all of this. 3. Geopolitics are deteriorating with the greatest risk of all being Pakistan. That risk is reaching critical levels. The price of Crude can easily be put on a course of plus $100 from whatever level it is trading at when Pakistan blows. 4. The Fed is jawboning against inflation and practicing verbal intervention by placing an outlook for increased interest rates in the minutes of the last Fed meeting. 5. The message that would be sent by a September increase in interest rates would trigger the need for more rescues, more loans to develop electric cars and more funding for Freddie and Fanny as starters. 6. The Case Sheller approach to predict housing market and render valuation for the many forms of credit and mortgage derivatives only looks back with accuracy. Projecting forward is its major weakness. You must act to defend yourselves by reducing your exposure to financial agents, ignoring the lies and spin being thrown at you until you are covered by six feet of fabricated crap. The USA has adopted a plan of inflating monetary policy and lying in order to save USA Inc. from bankruptcy. The US dollar is the common share of the USA Inc. If you are a bull on the dollar you have bought the bull blasted at you. You can always have a bear market rally in the common share of USA Inc., but it is limited by major cash sellers and the distasteful event in government agencies. Gold will trade at $1200 and $1650. The US dollar will trade at .62 and .52 on the USDX as bull cannot change a pig's ear into a silk purse. The argument that the USA is the major of the major power militaristically is what collapses in currency are made of, not a universal acceptability as the warmongers would have you believe. That is exactly what happened when the Ruble became rubble as the USSR went broke and imploded. Maybe standing back and watching the flow is better than locking onto some isolated event that I receive so many questions on. Respectfully yours, Jim

Credit Crisis Still `Far From Over,' Merrill Says (Update2) By Jeff Kearns and Bradley Keoun Aug. 13 (Bloomberg) -- The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said. ``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.'' The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending capacity worldwide, Bernstein said. Profit for U.S. banks and brokerages tumbled 94 percent in the second quarter from a year earlier, according to Bloomberg data. Financial stocks in the Standard & Poor's 500 Index have tumbled 30 percent this year for the worst performance among 10 industry groups. The KBW Bank Index, a composite of 24 U.S. banking stocks, fell 4.1 percent today. Financial companies in the S&P 500 fell 3 percent for the biggest drop among 10 industry groups. Credit Crisis Still `Far From Over,' Merrill Says (Update2) The stocks aren't likely to rebound soon, Bernstein wrote. ``The problems in the financial sector appear to us to be far from over,'' he wrote. ``We are skeptical that trying to bottom-fish will prove profitable.'' `Global Phenomenon'   One of the largest banks in Asia recently posted an earnings shortfall from losses on mortgage-related collateralized debt obligations and other troubled assets, showing the crisis has spread, Bernstein wrote. The pace of initial public stock offerings in India and Singapore has dropped ``considerably,'' he wrote. ``The sector's underperformance clearly has been a global phenomenon,'' Bernstein wrote. ``History shows that the U.S. tends to lead the world into slowdowns and recessions.'' The worst might still be ahead for smaller U.S. banks, he wrote. Banks and brokerage firms worldwide have recorded more than $500 billion of securities writedowns and increased costs related to bad loans, according to Bloomberg data. To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net.

Credit Crisis Still `Far From Over,' Merrill Says (Update2) By Jeff Kearns and Bradley Keoun Aug. 13 (Bloomberg) -- The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said. ``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.'' The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending capacity worldwide, Bernstein said. Profit for U.S. banks and brokerages tumbled 94 percent in the second quarter from a year earlier, according to Bloomberg data. Financial stocks in the Standard & Poor's 500 Index have tumbled 30 percent this year for the worst performance among 10 industry groups. The KBW Bank Index, a composite of 24 U.S. banking stocks, fell 4.1 percent today. Financial companies in the S&P 500 fell 3 percent for the biggest drop among 10 industry groups. Credit Crisis Still `Far From Over,' Merrill Says (Update2) The stocks aren't likely to rebound soon, Bernstein wrote. ``The problems in the financial sector appear to us to be far from over,'' he wrote. ``We are skeptical that trying to bottom-fish will prove profitable.'' `Global Phenomenon' One of the largest banks in Asia recently posted an earnings shortfall from losses on mortgage-related collateralized debt obligations and other troubled assets, showing the crisis has spread, Bernstein wrote. The pace of initial public stock offerings in India and Singapore has dropped ``considerably,'' he wrote. ``The sector's underperformance clearly has been a global phenomenon,'' Bernstein wrote. ``History shows that the U.S. tends to lead the world into slowdowns and recessions.'' The worst might still be ahead for smaller U.S. banks, he wrote. Banks and brokerage firms worldwide have recorded more than $500 billion of securities writedowns and increased costs related to bad loans, according to Bloomberg data. To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net.

Jim Sinclair's Commentary: August 7, 2008 Sleep well all you dollar holders in the belief that public funds will solve everything. The next time you hear a politician use the word "billion" in a casual manner think about whether you want them spending YOUR tax money. A billion is a difficult number to comprehend but one advertising agency did a good job of putting that figure into perspective. Here it is: A. A billion seconds ago it was 1959. B. A billion minutes ago Jesus was alive. C. A billion hours ago our ancestors were living in the Stone Age. D. A billion days ago no-one walked on the earth on two feet. E. A billion dollars ago was only 8 hours and 20 minutes at the rate our government is spending it. Now think about the size of the notional value of the mountain of all derivative of which 95% are OTC Derivatives: One Quadrillion, one thousand one hundred and forty four trillion.(Source: The Bank for International settlements). Many people out there are resting assured that all financial problems have been solved by the use of public funds to sustain those that created these problems in the first place. If you can sleep soundly with such a brew boiling while believing there are no CONSEQUENCES, you are taking some heavy duty sleep medication. Public money will not solve all problems and if there isn't enough we will simply print more. That's a recipe for disaster. Despite the fact a tropical storm is bearing down on the Houston/Galveston area, Dan Norcini managed to find time to prepare these charts for our readers. David Duval Managing Editor Please click to enlarge in PDF format. Jim Sinclair's Commentary: It is not a recovery that is just around the corner! International Herald Tribune A second, far larger wave of U.S. mortgage defaults is building By Vikas Bajaj Monday, August 4, 2008 NEW YORK: The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed. After two years of upward spiraling defaults, the problems with mortgages made to people with weak, or subprime, credit are showing the first, tentative signs of leveling off. But with the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-A, mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time. While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said. Defaults are likely to accelerate because many homeowners' monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks are tightening their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are alt-A loans, many of which were made to people with good credit scores without proof of their income or assets. Much will depend on the course of the economy, particularly unemployment. A weaker job market would push more homeowners toward the financial brink. The U.S. Labor Department reported Friday that the unemployment rate climbed to a four-year high in July. Other downbeat reports last week documented another drop in home prices, slower economic growth than expected and a huge loss at General Motors.

Last Updated: 8:18am BST 28/07/2008

World markets are poised for a major relief rally today after the US Congress met in a rare weekend session to pass the most far-reaching rescue package for America's financial system since Franklin Roosevelt's New Deal.

The emergency bail-out gives the US Treasury sweeping authority to inject capital into the giant mortgage lenders Fannie Mae and Freddie Mac, which together own or guarantee half the country's $12 trillion stock of home loans.

The ceiling on the US national debt has been lifted by a further $800bn, giving the Treasury almost unlimited resources to prop up the two lenders.

In parallel, the Federal Housing Authority (FHA) is to guarantee up to $300bn of fresh mortgages for struggling homeowners trapped with soaring loan costs, often the result of "honeytrap" contracts.

The scheme aims to avoid an avalanche of fresh defaults as the housing market continues to deteriorate. Over 740,000 homes fell into foreclosure in the second quarter.

The new bill - reluctantly endorsed yesterday by the White House despite lashings of lard for Democratic special interests - should help to calm the markets after wild gyrations last week. Global bourses have suffered the worst mid-summer sell-off since the early 1930s.

The share prices of Fannie and Freddie, the world's two biggest financial institutions, have dropped by almost 85pc.

The rating agency Standard & Poor's said it may downgrade a $19bn chunk of subordinated debt issued by two agencies despite the Treasury plan, citing "heightened financial risks". This raises implicit concerns about the credit worthiness of the United States itself, though S&P denies any plan to cut the US sovereign rating at this stage.

Hank Paulson, the US treasury secretary, brushed aside complaints that the rescue package amounts to a taxpayer bail-out for shareholders, insisting that the new authority to buy stock is merely intended to reassure investors and may never be activated if all goes well. The authority expires at the end of 2009.

A vocal minority on Capitol Hill now fears that the US government is shielding Wall Street from the consequences of its own folly. The risk of default has been taken over by society as a whole, while investors alone stand to gain from any recovery.

"This bill has moral hazard written all over it: we are letting a monster loose," said Jeff Flake, a Republican Congressman.

�  Global economy at danger point

�  European recession looms

The majority of President George W Bush's own party voted against the package in the House. A new regulator will take charge of Fannie and Freddie, but this addition has the look of an afterthought.

Critics say Washington should have adopted the sterner methods of Norwegian and Swedish regulators during the Scandinavian banking crisis of the early 1990s, when shareholders received nothing after the banks were seized.

Mr Paulson is concerned that such Draconian methods could aggravate the crisis by making it harder for US banks to attract fresh capital. The financial system remains extremely fragile. The Federal Deposit Insurance Corporation (FDIC) intervened late on Friday to take over two more bankrupt lenders, First National Bank of Nevada and First Heritage Bank. It follows the seizure of California's IndyMac two weeks ago.

Christopher Dodd, chairman of the Senate banking committee, said the new package was vitally needed. "We are in the midst of the most serious economic crisis to face our nation in many years. This bill is going to make a difference almost immediately," he said.

Paul Ashworth, US strategist at Capital Economics, said US bank credit had been contracting for the last quarter. While the fiscal stimulus package helped to keep the economy afloat in the second quarter, this one-off boost is now largely exhausted.

"The economy is likely to slide into a more severe recession during the rest of the year as the credit crunch gradually begins to have a more pronounced impact on the economy," he said.

Some 400,000 homeowners are expected to benefit from the FHA's new mortgage facility, which is confined to those trying keep up with their payments. This is a small proportion of the estimated 11m American households now facing negative equity, a figure that is certain to rise much further as house prices deflate. The overhang of unsold houses on the market has reached 11.1 months supply.

BNP Paribas said the new danger is that banks in other parts of the world will soon find themselves in similar difficulties as the long-term effects of the credit crunch bite deeper.

"The epicentre of the financial market sell-off will switch from the US into Europe and Oceania. Most of Euroland has entered a recession. A synchronised global downturn is on the agenda," it said.

Jim Sinclair�s Commentary

There is no practical solution to the present credit market problems. There are only acts of desperation in reaction to each crisis further corrupting the shaking foundation of the US dollar.

This is an act of monetizing bankrupt home mortgages. Bankrupt home mortgages have more problems than just resets.

This is the application of a tool that is guaranteed to put additional pressure on the US dollar once the fooled fools wake up. This is how Weimar got into irreversible monetary problems.

This implies that I am wrong about gold only reaching $1650 and brings into play, fundamentally, the possibility of the two Angels above this level.

Have you protected yourself from what is now inevitable?

Paul told the House:

"These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed."

"There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it's been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers." Paul continued.

In one of Paul's most memorable speeches to date, the Congressman spoke of rampant authoritarianism having replaced the principles of liberty that the United States was founded upon and warned that current empire building financed through inflation and debt signals a most frightening period in history.

"Our arrogance and aggressiveness have been used to promote a world empire backed by the most powerful army of history. This type of globalist intervention creates problems for all citizens of the world and fails to contribute to the well-being of the world's populations. Just think how our personal liberties have been trashed here at home in the last decade." Paul urged fellow representatives.

Paul outlined the history of the current economic crisis and alluded to key events such as the inception of the Federal Reserve System, the creation of the Bretton-Woods Monetary System and the creation of a "dollar bubble".

"This bubble is different and bigger for another reason." Paul argued.

"The central banks of the world secretly collude to centrally plan the world economy. I'm convinced that agreements among central banks to �monetize� U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone--especially the U.S. Congress that doesn't care, or just flat doesn't understand."

Yesterday, the Congressman also confronted Federal Reserve Chairman Ben Bernanke over what he described as a 35 plus year dollar bubble, telling him "You are probably the biggest taxer in the country", citing the inflationary fiat money system as the most unfair and regressive form of taxation there is.

A stunned Bernanke put up little resistance and simply agreed with Paul, stating �Congressman, I couldn�t agree with you more that inflation is a tax, and that inflation is currently too high.�

Paul also pointed out that government bail out packages for lenders will inevitably lead to a further increases in the already stratospheric national debt.

Watch Ron Paul once again take Bernanke to school on the economy:

Ron Paul's entire speech before the House now follows:

Madam Speaker, I have, for the past 35 years, expressed my grave concern for the future of America . The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days--growing more frequent all the time--when I'm convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.

Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world--unless we quickly change our ways.

America , with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and an historic event.

The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide �bread and circuses� for the people. The notion that a country can afford �guns and butter� with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and the massive expansion of the welfare state were not problems. The seventies proved that assumption wrong.

Today things are different from even ancient times or the 1970s. There is something to the argument that we are now a global economy. The world has more people and is more integrated due to modern technology, communications, and travel. If modern technology had been used to promote the ideas of liberty, free markets, sound money and trade, it would have ushered in a new golden age--a globalism we could accept.

Instead, the wealth and freedom we now enjoy are shrinking and rest upon a fragile philosophic infrastructure. It is not unlike the levies and bridges in our own country that our system of war and welfare has caused us to ignore.

I'm fearful that my concerns have been legitimate and may even be worse than I first thought. They are now at our doorstep. Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation.

There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it's been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers.

Being an unchallenged sole superpower was never accepted by us with a sense of humility and respect. Our arrogance and aggressiveness have been used to promote a world empire backed by the most powerful army of history. This type of globalist intervention creates problems for all citizens of the world and fails to contribute to the well-being of the world's populations. Just think how our personal liberties have been trashed here at home in the last decade.

The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical-care costs; the collapse of the housing bubble; the bursting of the NASDAQ bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we'll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

There are various reasons that the world economy has been globalized and the problems we face are worldwide. We cannot understand what we're facing without understanding fiat money and the long-developing dollar bubble.

There were several stages. From the inception of the Federal Reserve System in 1913 to 1933, the Central Bank established itself as the official dollar manager. By 1933, Americans could no longer own gold, thus removing restraint on the Federal Reserve to inflate for war and welfare.

By 1945, further restraints were removed by creating the Bretton-Woods Monetary System making the dollar the reserve currency of the world. This system lasted up until 1971. During the period between 1945 and 1971, some restraints on the Fed remained in place. Foreigners, but not Americans, could convert dollars to gold at $35 an ounce. Due to the excessive dollars being created, that system came to an end in 1971.

It's the post Bretton-Woods system that was responsible for globalizing inflation and markets and for generating a gigantic worldwide dollar bubble. That bubble is now bursting, and we're seeing what it's like to suffer the consequences of the many previous economic errors.

Ironically in these past 35 years, we have benefited from this very flawed system. Because the world accepted dollars as if they were gold, we only had to counterfeit more dollars, spend them overseas (indirectly encouraging our jobs to go overseas as well) and enjoy unearned prosperity. Those who took our dollars and gave us goods and services were only too anxious to loan those dollars back to us. This allowed us to export our inflation and delay the consequences we now are starting to see.

But it was never destined to last, and now we have to pay the piper. Our huge foreign debt must be paid or liquidated. Our entitlements are coming due just as the world has become more reluctant to hold dollars. The consequence of that decision is price inflation in this country--and that's what we are witnessing today. Already price inflation overseas is even higher than here at home as a consequence of foreign central banks' willingness to monetize our debt.

Printing dollars over long periods of time may not immediately push prices up--yet in time it always does. Now we're seeing catch-up for past inflating of the monetary supply. As bad as it is today with $4 a gallon gasoline, this is just the beginning. It's a gross distraction to hound away at �drill, drill, drill� as a solution to the dollar crisis and high gasoline prices. Its okay to let the market increase supplies and drill, but that issue is a gross distraction from the sins of deficits and Federal Reserve monetary shenanigans.

This bubble is different and bigger for another reason. The central banks of the world secretly collude to centrally plan the world economy. I'm convinced that agreements among central banks to �monetize� U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone--especially the U.S. Congress that doesn't care, or just flat doesn't understand. As this �gift� to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but eventually the markets overwhelm when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, thus igniting inflationary fever.

This time--since there are so many dollars and so many countries involved--the Fed has been able to �paper� over every approaching crisis for the past 15 years, especially with Alan Greenspan as Chairman of the Federal Reserve Board, which has allowed the bubble to become history's greatest.

The mistakes made with excessive credit at artificially low rates are huge, and the market is demanding a correction. This involves excessive debt, misdirected investments, over-investments, and all the other problems caused by the government when spending the money they should never have had. Foreign militarism, welfare handouts and $80 trillion entitlement promises are all coming to an end. We don't have the money or the wealth-creating capacity to catch up and care for all the needs that now exist because we rejected the market economy, sound money, self reliance and the principles of liberty.

Since the correction of all this misallocation of resources is necessary and must come, one can look for some good that may come as this �Big Event� unfolds.

There are two choices that people can make. The one choice that is unavailable to us is to limp along with the status quo and prop up the system with more debt, inflation and lies. That won't happen.

One of the two choices, and the one chosen so often by government in the past is that of rejecting the principles of liberty and resorting to even bigger and more authoritarian government. Some argue that giving dictatorial powers to the President, just as we have allowed him to run the American empire, is what we should do. That's the great danger, and in this post-911 atmosphere, too many Americans are seeking safety over freedom. We have already lost too many of our personal liberties already. Real fear of economic collapse could prompt central planners to act to such a degree that the New Deal of the 30's might look like Jefferson 's Declaration of Independence.

The more the government is allowed to do in taking over and running the economy, the deeper the depression gets and the longer it lasts. That was the story of the 30s and the early 40s, and the same mistakes are likely to be made again if we do not wake up.

But the good news is that it need not be so bad if we do the right thing. I saw �Something Big� happening in the past 18 months on the campaign trail. I was encouraged that we are capable of waking up and doing the right thing. I have literally met thousands of high school and college kids who are quite willing to accept the challenge and responsibility of a free society and reject the cradle-to-grave welfare that is promised them by so many do-good politicians.

If more hear the mess