The Madness of Political Necessity
Jim Sinclair

If you believe that Treasury Secretary Snow doesn’t understand the implications of what he is doing regarding the Asian Currencies then think again. What is occurring and being publicly televised is the madness of political necessity over good economics.

What he’s saying is nothing more than a Snow job to keep the incumbent in office. The barn of fiscal responsibility is being burned down publicly in the program of sustaining the incumbent and that barn is called the US dollar.

Don’t kid yourself. Washington reads this page because you can sometimes see the market stabilization force take place almost immediately after I post. In fact, this occurred today. I take that as a compliment but certainly weigh my responsibility to not place the Community at risk by saying too much.

Military actions in Iraq and Afghanistan are beginning to take on a character that can’t be blamed on “mad gunmen, recently released criminals or random terrorists.” Our loyal military are under orders from their commander and chief and are laying down their lives bravely every day against trained guerilla soldiers who are more than willing to die for their cause.

Please do not deprecate the bravery of our troops who face a formidable force that is reminiscent of the Vietnam era by characterizing their enemy as inept or simply crazy. You will notice that incidents particularly in Iraq are taking on a larger scale which suggests a well organized strategy on the part of opposing forces.

You might also note that someone in the military finally realized that allowing 13,000 Turkish Troops in Iraq, as I mentioned before, was totally idiotic. The reason for that is because the Turks are sworn enemies of the Iraqi Kurds and they would be seen as an occupying force. However, the recent cancellation of that plan has not been announced in a mass media blitz nor will it likely happen.

More than any other in recent times, the current administration has done more to polarize people on the domestic and international fronts, tearing apart the seams of commerce that made this country the world’s only super power and planting the seeds of long-term derision.

An unwillingness to reverse the policies that are shipping our net worth to Asia and destroying our balance sheet is a clear revelation of a polarized view of the world by our national leadership. As in investing and trading there is a point when you have to admit error and close out your losses. It is an error to spend what you do not have by orders of magnitude. It is an error to witness the value of your common share decline and fail to adopt policies to reverse the decline. It is an error to fight a guerilla force on the ground in Asia. General Pershing made that statement and since he said that no one has paid any attention to his comments and therefore his legacy.

The fact that leadership in this country does not reverse its failed strategy does not bode well for the future. It speaks to a mindset of isolation with total disregard for consequences. It is this that gold takes its queue from and goes to extraordinary levels.

The yen is all that counts now in the gold price because it is the driver of Asian currencies as yen to dollar appreciation against the dollar impacts other currencies across Asia.

The fallacy of falling for the sales pitch of the IMF and World Bank in the almost universal acceptance of the dollar reserve standard is now coming home as a major error to central banks worldwide. This is the real implication of the very public testimony by our Treasury Secretary and demands from our legislature for protective tariffs against China.

This is a public demonstration of ceremonial suicide for the dollar and as major money entities see this happen they are flooding into Asian currencies and bailing out of the dollar.

Then Asian currencies will float up thereby killing the cash cow of the incipient economic recovery in the US. All this is occurring as the US Treasury prepares to sell $26 billion worth of new US Treasury paper. That timing is amazingly stupid but the reality is the Treasury has no choice.

The US government needs to borrow that money now and that demand will do nothing but grow until it kills the bond market by increasing supply in the face of declining demand due to currency weakness. That is suicide anyway you look at it in terms of dollar management.

The Treasury must come to the market and the Federal Reserve must make sure that the liquidity is there to absorb the supply of US borrowing.

This is why gold is going up significantly NOW.