Tara Gold Resources Relaxing Banking Rules Will Only Lead to More Banking Madness by 24hgold

Re:        Chairman's Corner - Sunday, December 16, 2007
Title:     Relaxing Banking Rules Will Only Lead to More Banking Madness
Author:    Jim Sinclair

Dear Friends,

In my lifetime I have seen some really dumb things but reducing the capital requirements for banking institutions must take the cake. Capital requirements are the only control the totally amoral money industry has in place.

This suggestion (see article below) for a so-called "solution" would let financial institutions have commitments with no demand to carry the required capital to back them. Isn't that sort of how we got here to begin with: namely through the creation of too many commitments in items too large and structured by math rather than by street smarts? These instruments were clearly destined NOT TO FUNCTION? I have warned of this outcome since 2000.

There is NO PRACTICAL SOLUTION to this problem outside of an immediate recovery in real estate conditions where average prices return to those which existed in 2006. The chance of that is zero.

My vision for 2011 is ugly beyond your wildest imagination. Are your prepared for what's coming?

1. Do you have paper certificates for your shares?
2. Are you still significantly involved with Internet financial entities?
3. Are you in debt beyond your fully paid physical gold?
4. Are you in a precious metals ETF where you cannot take delivery of paper certificates?
5. Do you have significant funds in time deposits at your local bank?
6. Do you have Federal T Bills in the non-dollar Cando and Swissy?
7. Have you seen to it that your family is in a strong financial position?
8. Have you protected your company treasury?
9. Have you, to the best of your practical ability, eliminated agents between you and your assets?
10. Have you taken delivery of your coins from your coin dealer?
11. Have you withdrawn your cash balance from all banks and brokers? Do not forget Citi restrictions on the amounts of outgoing bank wire money transfers.
12. Are you charting your liquid net worth on a weekly basis?
13. Have you studied the simple TA I have offered you? When the world wallows in complexity the only defense you have is to return to simplicity.
14. Have you seen the DVD, "The Secret"? The greatest wealth you can have is self confidence, which is confidence in the SELF.
15. Last and most important, do you have insurance against the failure of the system to function? Gold is that insurance policy you pray you won't have to collect on - but you will. Gold is going to $1050 and onward to $1650.

Regards,

Jim Sinclair

Call to relax Basel banking rules
By Edmund Conway, Economics Editor
Last Updated: 1:13am GMT 16/12/2007

The Government must suspend a set of key banking regulations at the heart of the current financial crisis or risk seeing the economy spiral towards a future that could "make 1929 look like a walk in the park", one of Britain's leading economists has warned.

Peter Spencer has called for a suspension of the Basel system of banking regulations.

Peter Spencer, of the Ernst & Young Item Club, said conflicts caused by the Basel system of banking regulations, which determine how much capital banks must raise to keep their books in order, are the root cause of the crunch and were serving to worsen the City's plight.

The regulations meant that banks forced to take off-balance sheet assets from troubled structured investment vehicles on to their books had little choice but either to raise money from abroad or cut back dramatically on their spending, he said.

He warned that, if London's money markets remained frozen and the authorities retain the strict Basel regulations, the full scale of the eventual credit crunch and economic slump could be "disastrous".

Dismissing the assumption that banks are not lending to each other on the money markets because they lack confidence in each others' potential solvency, he argued that they were, in practice, prevented from lending the cash at all because it could leave their balance sheets falling foul of the Basel regulations.

Prof Spencer said that although Basel II - an updated version of the accord - may loosen the regulation slightly, it is unlikely to be enough to improve the situation.

"The Bank is staring into the abyss," he said. "The Financial Services Authority must go round and check that all banks are solvent, and then it should cut the Basel capital requirement level from 8pc to about 6pc.

"Until then, with the money markets frozen, the Bank will have to go on being the lender of first resort, rather than of last resort. "

more...

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Message sent on Sun Dec 16, 2007 at 5:51:44 PM Pacific Time

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