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A Mirror Image In the Unfolding Of Chapters From 1929-32

On December 11 2008

Re:        Chairman's Corner - Wednesday, December 10, 2008
Title:     A Mirror Image In the Unfolding Of Chapters From 1929-32
Author:    Jim Sinclair

Dear Friends,

>From the Dow Jones high in 1929 it took until 1932 to establish the absolute low. From the establishment of that low point in 1932, it took 35 years to regain the 1929 high (1954).

It was no coincidence that Roosevelt went to fiscal stimulation in 1932-1933 in the form of jobs creation by proxy, such as the Civil Conservation Corp (CCC) and other make-work programs.

Roosevelt proposed conservation and other work programs as a means of unemployment relief during the 1932 presidential campaign. Senate Bill 5.598, the Emergency Conservation Work Act, was signed into law on March 31, 1933. This initiative is still on the books, having not been funded since 1941.

This is why liberal President-elect Obama will embrace fiscal stimulation with a vengeance, possibly as soon as at the Swear-In Ceremony.

I am told that $1 trillion is only for starters.

Today is so different in substance from 1929-1932 even if it is a mirror image in unfolding chapters.

My good friend Monty Guild is spot on when he predicts the final cost of the sin of OTC derivatives will reach $20 trillion - if we are lucky.

CONSEQUENCES my friends. Consequences cannot be avoided.

While the Fed and Treasury take their lead from what went wrong with 1929 anti-deflationary policies, no one is considering the consequences of their present economic acts that will go infinitely more wrong than any boo-boo in the 1929-1932 period.

Gold is going much higher than $1,650, a view I have held since 2000. In fact, I believe that estimate may prove to be terribly conservative.

Be strong. Stop looking for why you are wrong and start knowing why we are right.

Bert Seligman taught me a simple truth: "The weak succumb, the strong survive."

Be strong in your commitment. Don't let some wacko with a second hand laptop and a bottle of cheap gin cause you to lose sleep.

Here are some questions to exercise your powers of logic:

If there are $8.5 trillion of losses in OTC derivatives, is there not a corresponding profit in cash or position value somewhere?

When the Federal Reserve buys all this so-called toxic paper, does the Federal Reserve not become the counterparty of obligation to the OTC derivative with humongous losses?

Why is there so much Washington noise about TARP, a program totaling $700 billion, and total silence on the subject of $8.5 trillion?

Respectfully yours,

Jim

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Message sent on Wed Dec 10, 2008 at 5:29:39 PM Pacific Time