Tanzanian Royalty Exploration 30 reasons for the Second Great Depression by 24hgold

Re:        Chairman's Corner - Thursday, November 20, 2008
Title:     30 reasons for the Second Great Depression
Author:    Jim Sinclair

Dear Friends,

On or before January 14, 2011, gold will trade at or above $1,650. This is simply reporting on the symptoms created by my Formula which was originally posted in 2006 and is presented here for references purposes:

Jim's Formula:
September 1, 2006

1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.
3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.
5. Lower profits leads to lower Federal Tax revenues.
6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Jim Sinclair's Commentary:

I also want to bring your attention to the following MarketWatch article which paints a bleak economic picture for the world but a positive one for gold:

30 reasons for Great Depression 2 by 2011
New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster
By Paul B. Farrell, MarketWatch
Last update: 11:53 a.m. EST Nov. 19, 2008

(Excerpted from the following article)

30 'leading edge' indicators of the coming Great Depression 2

Every day there is more breaking news, proof Wall Street's greed is already back to "business as usual" and in denial, grabbing more and more from the new "Bailouts-R-Us" bonanza of free taxpayer cash and credits, like two-year-olds in a toy store at Christmas --- anything to boost earnings, profits and stock prices, and keep those bonuses and salaries flowing, anything to blow a new bubble.

Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:

1. America's credit rating may soon be downgraded below AAA

2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"

3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse

4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets

5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year

6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers

7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money

8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states

9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt

10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps

11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up

12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns

13. Fed also plans to provide billions to $3.6 trillion money-market fund industry

14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars

15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion

16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs

17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown

18. Big three automakers near bankruptcy; unions, workers, retirees will suffer 19. Corporate bond market, both junk and top-rated, slumps more than 25%

20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall

21. Unemployment heading toward 8% plus; more 1930's photos of soup lines

22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists

23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai

24. Despite global recession, U.S. trade deficit continues, now at $650 billion

25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities

26. Now 46 million uninsured as medical, drug costs explode

27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt

28. Outgoing leaders handicapping new administration with huge liabilities

29. The "antitaxes" message is a new bubble, a new version of the American dream offering a free lunch, no sacrifices, exposing us to more false promises

No. 30: At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"

We see the Great Depression 2. Why? Wall Street's self-interested greed. They are their own worst enemy ... and America's too.

more...

Jim Sinclair's Commentary:

Note to junior exploration, development and producing companies:

Unless the person or company is well known to you, already a large "registered" stockholder or a proven long, do not take private placements. The shorts are looking to cover.

Things may well be turning. Deal with well known friends only, not strangers and most certainly none of the "bad guys."

When the HUI turns, the cover is on.

Regards,

Jim

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Message sent on Thu Nov 20, 2008 at 7:38:20 PM Pacific Time

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