Dear CIGAs,

This is it.

The DJII futures are down over 500 points.

If the Federal Reserve fails to take emergency action before the US opening tomorrow, you will see the DJII open down 1000 points as the public joins this professional panic.

Everything you see happening is contained in the Formula, which will be the catalyst that takes gold again above $887.50 and to $1650.

As long as you have followed my plea to have NO MARGIN on anything gold I see no problems.

If you have margin the rule is never meet a margin call, but sell whatever is needed to meet the call or more, never less.

It is a better wager that the Fed will immediately drop rates by 1 full percentage point.

It is a slam dunk that all Western central banks will cut loose and flood the world with more liquidity than ever seen before.

If central banks fail to cause a torrent of liquidity from their unending check books then $450 trillion of derivatives will take us to the world of Mad Max.

Monetary inflation ALWAYS causes PRICE inflation even without strong business conditions.

Prices of hard and transportable assets rise regardless of business conditions.

All currencies fall and the stronger currency is the laggard in the race to the bottom of the tank.

Stocks Plummet in Germany, Hong Kong, India, Brazil in Rout
By Sarah Thompson

Jan. 21 (Bloomberg) -- Stocks plunged in Germany, Hong Kong, India and Brazil, and U.S. index futures dropped on mounting speculation that the global economy is slowing and company defaults will rise.

Europe's Dow Jones Stoxx 600 Index fell the most since the Sept. 11 terrorist attacks and sank into a bear market, as Allianz SE and BNP Paribas SA slid. Hong Kong's Hang Seng Index had its biggest drop in six years after BNP Paribas said Bank of China Ltd. may write down overseas securities by $4.8 billion because of losses from U.S. subprime mortgages. Citigroup Inc. retreated in Frankfurt.

The MSCI World Index slipped 2.4 percent to 1,402.75 at 2:44 p.m. in London, extending its decline from an Oct. 31 record to 17 percent. India's Sensitive Index lost the most since 2004, while Germany's DAX slid the most since March 2003. Futures on the Standard & Poor's 500 Index sank 3.4 percent. Trading in the U.S. is closed today for Martin Luther King Day.

``It's the worst I've ever seen,'' said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. ``The financial system is in terrible shape, and no one knows where this will end.''

More…

Please take heart. The Formula is unfolding. If you have faith in me you can stop worrying. We have traveled a great distance together. So far, so good.

• Believe me that the Formula is 100% correct. The Formula will support the rise in the price of gold from its recent high at $913 to $1050 and then to $1650. As I see it, there is NO question about it. 
• This is it, trust me. 
• The meltdown is not in the billions, it is in the trillions. Central banks will seek to hold off the deluge by standard operating means that will only feed the INFLATION side of the STAGFLATION equation. Be assured it is happening as we speak, right here and right now today. 
• The recent drop in equities markets has the Bush administration extremely worried. At present the White House holds Bernanke’s strings. 
• The Bernanke Federal Reserve will not fail to serve its masters and in fact will exceed any such effort in the past. 
• The disinformation that a major slowdown in business is negative to gold is totally incorrect. It is the foundation of the next major move to the upside.
• Those of you overcome by fear are operating on your emotions. 
• Sometimes I have to ask why I try so hard to help those that don't listen. 
• Some people have said my mission is impossible because only the few will listen and less will learn.
• Because of today the PPT will demand the Federal Reserve take EMERGENCY ACTION and act prior to its scheduled next meeting.
• Today European investors are throwing gold bullion and gold shares into the trash can and are running like scared cats motivated by JUST WHAT WILL BE THE CAUSE OF GOLD going to and probably through $1650.

Take heart and put your hand in mine, as long as you have not used margin.

Regards,
Jim

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.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this "slow business" as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.