From Jim Sinclair at http://www.jsmineset.com/ [SIZE=+1]The Paulson "Master Of The Universe" Credit Save [/SIZE]The dollar is doing a little better and is influencing Gold lower by a multiple of 10 because: Paulson is about to make worthless paper worth-full, or at least make the market think that this Master of the Universe is going to solve both the credit collapse and derivative meltdown while saving all from foreclosure. That means the problem is worse than most know. The Fed has few if any options so a “show and tell” has to be done. Financial shares are RALLYING because Paulson is going to save the world. Since the world is going to be saved by Paulson, the “interest rate makes a currency value” crowd is hiding so they don’t hurt the save the world plan. Recession is being interpreted as negative to Gold as no one cares about the major impact this will have on the US Federal Budget deficit. Forgotten completely is the Treasury International Currency Flows report that is headed for net negative. The fact that as the Ruble moves towards total convertibility Russia will stop taking dollars for energy. China is going to continue to diversify out of the dollar using any strength as a market opportunity. But most of all regarding the "Paulson Master of the Universe Global Credit Save," any attempt to monetize bankruptcy will unleash an inflation of unprecedented dollar destruction only comparable to the Weimar case study. What I have repeatedly said to you is that there is NO PRACTICAL SOLUTION to the meltdown of credit derivatives that is occurring at the present time, or for that matter anytime. Practical means: a: of, relating to, or manifested in practice or action: not theoretical or ideal b: being such in practice or effect. A Solution is: a: An action or process of solving a problem Therefore a practical solution is not theoretical, and must be an action or process of solving a problem, not massaging or spinning it. The reason you have not seen any plan but the miserly (in comparison to the size of the problem) fund of international investment houses is because the problem is so large that it cannot be addressed effectively by the Treasury or the Federal Reserve. We are talking trillions here, not billions. Should the Federal Reserve attempt to buy up the bankruptcy debt they will unleash inflation without historical comparison. It is not to say they will not. In that attempt let us define precisely the mechanism of the action. Bankruptcy Monetization: To do this, the Fed cranks up the press, loads in some paper and green ink, and prints a brand new $200 billion or simply writes another check on its ever flowing, no balance checkbook. It is the same thing. The Fed takes the $200 billion just created and purchases the bankrupt, securitized debt instruments at artificial prices from the well connected international investment banks, other banks or funds. The money supply, even if hidden, goes up by $200 billion. The Fed now holds the bankrupt securitized vehicle at artificial prices. The instant increase in the money supply is hyper inflationary. This money benefits only the banks, funds and institutions, having no wealth effect for the consumer, and therefore hyper inflationary lacking economic stimulus. That is penultimate bamboozle. Bankruptcy Monetization may well occur. You must recognize how this fits the Weimar Experience. Simply drop the reason why Weimar engineered their inflation, known as “War Reparations,” and replace that with the words “Securitized mortgages with embedded credit and default derivative driven Bankruptcy Monetization.” My position is that there is NO PRACTICAL SOLUTION to the present and upcoming credit derivative meltdown. FOR THAT REASON, I REITERATE, “THIS IS IT.”
