Legendary gold guru Jim Sinclair has sent a message to subscribers tonight on The Fed's bailout of Europe which can be summed up in: No major clearing house will be allowed to fail.
Our favorite cartel banks are all primary dealers and clearing houses. The failure of Euro debt the size of Italy will spell the instant death of Goldman Sachs, BOA, JP Morgan, and the rest of the Western financial system due to massive credit default swaps (in the $ Trillions) written on European debt. This is obviously not acceptable and the only alternative- massive quantitative easing- will be the catalyst that sends gold and silver to unthinkable values.
Got Phyzz?
I have not written much about the recent failure of a major clearing house out of respect for my friends who are caught in that situation.
A clearing house of note is the mechanism of the marketplace without which trading simply does not occur. This is a situation where "Too Vital to Fail" trumps "Too Big to Fail."
You want to know why the Fed organized the do nothing European leaders in concerted action along with China? The answer is no major clearing house can be allowed to fail because then the market mechanism is broken.
The reason that sovereign debt cannot fail is the five largest US banks hold trillions of dollars of credit default swap OTC derivatives guaranteeing that garbage against failure.
If euro debt fails, the Western financial world implodes, so it will not now.
"QE to Infinity" and gold at $4500 is coming as sure as death and taxes. Good call, Alf!
What a head fake gold gave last week, turning almost everyone, even some big guys, gold bearish. They should have known better.
Regards,
Jim
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