Friday, 10 August 2007

Jim Sinclair's take on these events is always worth reading

Dear Friends,
Adding financial liquidity to the marketplace is happening both in Europe and in the US even though it’s being denied. This is nothing less than MONETARY INFLATION which by economic law translates into price inflation. Adding liquidity is like pouring gasoline on a bonfire. It is proof that central banks will burn down the barn to avoid a derivative crisis. The barn is their respective currencies.
The failure today of various hedge funds in mortgage debt in Europe is a failure in credit derivatives. You are witnessing Central Banks’ reaction to a failure of credit derivatives which simply cannot be permitted unless you live in the world of “Mad Max” in a financial sense. The Carry Trade has nothing to do with gold regardless of those that profess this piece of black PR. Believe it or not, today’s circumstances are what it takes to propel the price of gold above $1,650.
The US dollar has nowhere to go because if you think that a credit derivative failure is containable to any location - or at all - I will sell you the Brooklyn Bridge cheap. All that can be gained by blasting in huge amounts of international liquidity is a temporary slowdown of failures. Adding liquidity anywhere adds liquidity everywhere in a global financial world.
Do not run with the black boxes. When the dust clears, fundamentals will dawn on major investors which will take gold to and through all the angels. All you are seeing today is madmen and women going broke and building the major platform for a major up move in gold.
Respectfully,Jim Sinclair

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I teach Film, Media and English Lit.