From The International Forecaster, Wednesday, 1 June 2011
By Bob Chapman
The powers behind government obviously believe Americans are very simple people, or just plain dumb. First came the certificate of live birth that a 14 year old could have identified as a total forgery and then came the death of Osama bin Laden, a man who had been dead for ten years. His death was accompanied by the most preposterous tale imaginable. The media mainstream totally controlled by those behind the curtain gave widespread dissemination of these unbelievable lies. We have news for the elitist propaganda machine and that is most Americans do not believe you in either case.
As these created episodes were carried out we again heard the secretary of the Treasury engage in more fantasy by telling us a strong dollar policy was still in place. These three elements then gave the dollar a push upward, as it became obvious that the EU and IMF were not getting the results they wanted in Greece, that is looting the country of just about everything the country had left. As we predicted, the euro had been run up to $1.49 to create a buffer zone for the euro to fall into as Greece went haywire. As we write the euro is $1.41. It is not difficult to catch on to what these one-worlders are up too, as international leaders shake their heads in disbelief and consternation. Mr. Obama’s approval ratings may have climbed 10% and in spite of his trip to Ireland London and France for the G-8 conclave, he is again losing ground fast. He will be back to 35% in the wink of an eye. In the meantime 35% of Americans want an immediate withdrawal from Afghanistan. That is up from 22% a year ago.
CIA asset and poster boy for world terrorism, Osama bin Laden can no longer help the cause of faux terrorism worldwide. His journey from 1984 was a long one. We can remember Ollie North telling us about him in 1986. The goal of the CIA was to bolster the presidency and something else equally important and that is to put an end to the upside performance of gold, silver and commodities. They have been reflecting the failure of the dollar, a victim of unsustainable debt. The events above also have served as a distraction of America’s real problems, which are financial and economic. The lies and temerity are simply unfathomable. Even those with an 80 I.Q. can see through these machinations. We wonder what will happen on August 2nd if the short-term debt is not extended? Is it any wonder that gold and silver have hit new highs in spite of government-manipulated markets? As we have just seen any cuts in entitlement programs such as Social Security and Medicare will result in quick one-way ticket out of the House or Senate. The possibility of small incremental budget cuts over five years and similar tax increases never entered these politician’s minds.
In addition, the financial scam of these scenarios was the deliberate takedown of silver and gold. These brazen, arrogant crooks had the transparent gall to raise margin requirements for silver five times in nine days, while a little bird told the commodities brokerage firms that the CME contract for silver should be doubled from $21,600 to $42,000 to wipe out almost all small and medium sized investors. This shows you the lengths to which government and those who control government will go to crush their antithesis, gold and silver. Again, it worked on the short term, but it cleaned out possible seller overhang and made it very easy for gold and silver to soon test their highs again. The elitists are fighting a losing battle.
As a result of monetary irresponsibility Japan, Europe, England and the US are in serious trouble, that won’t go away anytime soon. That means you do not want to be long the yen, euro, pound or US dollar, or for that matter any other currency. Why waste the effort, just stay long gold and silver coins, bullion and shares. The dollar and many other currencies are failed currencies. All of their debt situations are unsustainable. The US has raised the debt limit 75 times since 3/1962, and number 76 will be reality on 8/2/11. Or will it?
As Treasury auctions come and go the number of foreign buyers dwindles. That means the Fed has to buy exceedingly larger amounts of bills, notes and bonds. It should also be remembered that creating trillions of dollars gives the Fed more power over the system, as well as creating inflation. This kind of policy is explained as being instrumental in saving the system for the good of the people, when in fact it allows the Fed to be able to further control the people. This centralized, nationalized system of total Fed and government control means total government empowerment, something that has been dormant many years, which now comes into full view. The public has little input into government any more due to the fact that 95% of their legislators have been purchased from behind the scenes. They are told, accept this or we will destroy the system. At every turn Americans find they have less and less to say about government. This is how government and those who control it can create any lie and get away with it. This attitude and reality has not been lost to other nations, which express their thought process by buying less Treasuries. Recent data demonstrates that as the Fed had to add $24 billion in treasuries to its balance sheet, as foreign holdings fell the most in four years by $18.7 billion to $2.685 trillion. This fall in purchases is a vote of no confidence. These figures will get larger as each month passes, as other sovereign borrowers bail out. Each day brings the world monetary system closer to the brink. Does anyone really believe the Fed can buy 80% of Treasury sales indefinitely? Ultimately it is impossible, not to mention the horrendous inflation and perhaps hyperinflation created by such a policy.
We expect the Fed will continue its current policy of Treasury purchases. They have already said that they will continue to use funds to purchase that are created by maturing paper instead of reducing their balance sheet. This monetization will continue indefinitely from our viewpoint. As the economy recedes the Fed will declare that more Treasury and Agency purchases are necessary and QE3 will begin, although it will be called sometime else. We expect that to happen in July or August. Remember, the short-term debt extension if not enacted on August 2nd, will give the Fed the perfect excuse to begin QE3, as well. It would also give government the excuse to commandeer your private retirement plans. That would be based on the Treasury having to continue to borrow funds from public pensions to run the government. That wouldn’t be fair, so private pensions would be legislated in as well. Remember, anything is possible with these people.
It also should be noted that there have been no concrete steps to cut spending. Current talks between political parties are carried out in secret. Slowing down the rate of spending increases is not cutting the deficit. We hear of trillions being cut but no real response as yet, besides they only address spending increases. Inflation is here to stay and it will get lots worse. These policies, of course, will continue to destroy the dollar.
All of these events lead nations and corporation as to wonder why they are holding 60% of their foreign exchange in US dollars. Again, the law of diminishing returns comes into play. The more US Treasuries these buyers purchase the higher the bonds go and the lower the yield. They also know there will be no meaningful deficit reductions. As you saw from the figures above nations are dumping dollars and that process is accelerating.
The dollar falls, gold and silver and commodities rise, and the speculation orgy fueled by QE2 and the anticipation of QE3 rambles onward. We see no margin increases for the NYSE, but many of them for commodities, gold and silver. The elitists never will allow a level playing field. Talk about a criminal element a criminal syndicate, if you look at it hard all you can see is another Mafia operation. Silver margins rose five times in nine days or a net 84% and then that was doubled by commodity brokerages, which, of course, discovered the same problem simultaneously and wiped out almost all small and medium sized investors causing a collapse in silver from $50.00 to $32.50. While all this transpired JPM, HSBC and government were delighted and the CFTC was nowhere to be found, again. That is what our government and those who run it are all about.
The Fed and those who control it are trapped and there is no way out. Market manipulations will continue, as will unilateral policy changes. Their only option is to inflate until they cannot inflate anymore. In the meantime they still support the stock and bond markets and try their best to subdue gold, silver and commodities markets. One of the things talked about previously, that has completely faded from view is an exit strategy. The term is never used now. What we hear is low interest rates will be employed until full recovery is underway, which means until the system collapses. They do not care that the cost of money is 10% below the inflation rate. As long as the elitists have to engage in this subsidy, the higher gold, silver and commodity prices will go. One of the things as well that should not go unnoticed is that once interest rates are forced to rise in the real market the derivative market will implode, particularly in interest rate swaps.
As the fed goes forward with its monetary machinations prices rise, profit margins are squeezed and lack of rising wages and increased inflation are cutting into consumer buyer power. Consumption is already doing a slow fade. The Fed doesn’t like to talk about price inflation because they caused it via debt monetization and zero interest rates. Americans are angry and foreigners see us as the laughing stock of the world.
Three years ago we saw what was going to happen to municipal bonds and we recommended their sale. Since then they have taken massive losses. Many municipalities will go bankrupt and many workers will be fired. Most will never be able to get a job again. We believe the states and municipalities will not receive further funding from the federal government and they jointly will fall deeper into debt. As these entities and private ones as well go broke pensions will fall into default. This is part of the decimation of the under structure of society, so that almost everyone has nothing. The elitists in NYC and Washington want all the power in order to totally enslave mankind, but particularly the populations of the US, UK and Europe. At the same time, as they have over the past 3-1/2 years, they will hold the market up to continue the façade of prosperity. The market will be ready to fall when they want it to, in order to drive funds into the bond market to keep it solvent, because it is far more important than the stock market. We do not know when this will happen, but it will. Can you imagine what will happen to pension funds and insurance companies with the Dow at 6550 or lower? That is why we believe investors should be out of the stock market except for gold and silver shares. They should also be out of cash value life policies and annuities and certificates of deposit, and only own gold and silver coins, bullion and shares.
The Public is about to soon learn that without the Fed and QE3 the economy is lost. The public and investors will clamor for QE3, a bigger QE3, so the economy does not sink into a great dark pit. Money and credit will be created to put a band-aid on every financial problem in America, if not the world. Little do they know there will only be a short respite as hyperinflation grips the economy, and takes the entire financial and economic structure into eventual deflationary depression. There probably will be other bailouts as well. The states, municipalities, bank mortgages, the ever-present toxic waste and the reversal of home foreclosures. Everyone stays in their homes rent-free and the homes will be eventually nationalized, as we predicted eight years ago when we predicted that Fannie Mae and Freddie Mac would go bankrupt, and be taken over by the government. We also see further losses by banks in the trillions of dollars from mortgage securities and in false, illegal, foreclosures. That means many will have to be bailed out throughout the economy. That will take trillions and unfortunately includes QE3 for the world, much of which has the same problems. It guarantees the whole financial world is going down in flames. We see massive insolvency in the worlds’ future.
In the final analysis there will be devaluations, revolutions and multilateral default. All over the world everyone will pay the price, albeit by different degrees.
Over in Europe those nations in financial trouble cannot escape bankruptcy. Once Greece goes they will all go. That is for no other reason than they have to raise billions of dollars and interest rates are far too high for them to borrow and financially survive. Their old debt won’t be rolled and new debt won’t be placed, and they will all default. Greek yields are already over 25%.
EU members have little or no discipline. Under Maastricht no annual deficit should be more than 3%. We see no plan, just as in the UK and US, to attempt to pay back that debt. The realization is no one wanted to lend to any of these nations in trouble. That is why interest rates are so high. People should understand that Greece cannot pay back $400 billion, ever. There is no option but bankruptcy. As we said long ago the solvent countries would need $4 trillion to bail out the six problems and that would surely bankrupt them as well. Soon lenders will realize if you lend, no matter what the interest rate, you won’t get your money back. By October many European banks will fail, as will credit default swaps written by GS, JPM and Citi. The fails could take the three of them under even though they are securitized.
Average home prices slumped 5.1pc in the first quarter of the year from the same period in 2010, the latest report from the S&P Case-Shiller index showed yesterday.
The index's reading of 125.41 for the quarter was the lowest since house prices began falling in the summer of 2006.
The report "is marked by the confirmation of a double-dip in home prices across much of the nation," said David Blitzer, chairman of the committee that puts together the report. "Home prices continue on their downward spiral with no relief in sight."
While the housing market has been a well-known Achilles heel for the recovery, yesterday also saw evidence that the country's manufacturing sector - a robust, albeit small, part of the economy - is slowing.
A reading from the Institute for Supply Management's index that measures the state of manufacturing around Chicago showed a decline to 56.6 last month (MAY) from 67.5 in April.
There were further signs that high food and gas prices are denting the confidence of consumers, whose spending is central to the economy's fortunes.
Consumer confidence reached a six-month low in May, according to an index from the Conference Board, as the reading dropped to 60.8 from 66 in April.
The latest slew of readings adds more pressure on the US jobs market to continue its recovery and shore up Americans' confidence. The monthly jobs report for May will be released on Friday.
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THE INTERNATIONAL FORECASTER
WEDNESDAY, JUNE 1, 2011
06/01/11 (1) IF
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