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-- Posted Tuesday, 26 July 2005 | Digg This Article
THE INTERNATIONAL FORECASTER JULY 2005 (#4) Vol. 9 No. 7-4 (65 pages) P. O. Box 510518, Punta Gorda, FL 33951-0518 An international financial, economic, political and social commentary. Published and Edited by: Bob Chapman E-mail Addresses International_forecaster@yahoo.com (for correspondence) IF_distctr@yahoo.com (for information regarding your subscription or renewals) CHECK OUT OUR WEBSITE ADDRESS IS: www.theinternationalforecaster.com A recent Zogby Poll says, 42% of Americans favor impeachment proceedings if the President lied about the reasons for war and according to a recent ABC News/Washington Post Pool, 52% think he did. The general media, of course, has buried this. More than a month ago, GM informed us that they would be eliminating another 25,000 additional hourly production worker jobs, accompanied by the closure of an unspecified number of production facilities, probably seven. Unless there is aid from Congress, which developed for Chrysler in the 1980s, we will witness the disappearance of one of the most powerful corporations of the 20th century. If GM goes under we will lose a priceless, technologically advanced machine-tool capability. The termination of 25% of operating capacity will terminate the incomes of some 500,000 individuals and suppliers of one form or another, a tribute to free trade and globalization. GM is disassembling its operations in the US and globalizing them. Already 45% of GM’s North American production capacity – some 15 plants – is unused or produces models that generate little or no profit. That means more closings are on the way. Then there is the pension plan that is underfunded by $45 billion and effects 1.2 million pensioners and $270 billion in junk bonds, which could eventually destroy the derivatives market. The carnage at GM has only just begun and will be followed by Ford. Not a pretty picture, but reality as we see it today and in the future. As long as corporate America offshores and outsources, the American economy will continue to collapse. Another gift of free trade and globalization and the de-industrialization of America is that since 1978 the number of pension plans have shrunk by 75% and since 1999 by 25%. Only 5% of the remaining workers are covered by the pension benefit Guaranty Corp. Employers have refused to pay the PBGC premiums and that percentage is rising. Many of the covered 5%, such as Delta and Northwest Airlines, want to stop funding their plans. Most airline employees at UAL and TWA are receiving less than 50% of their pension payouts via PBGC. After 25 or 30 years they are getting what amounts to a minor welfare check. There are lots of bitter people in America and this is only the beginning. In the auto sector alone, unfunded pension liabilities alone are more than $60 billion. If the DOW fell to 7,268 as it did four years ago, that deficit would be $120 billion or more. The CBO believes the PDGC deficit, which is $23.5 billion presently, will be $71 billion minimum within 10 years. The administration’s answer is to hike per-worker insurance premiums by 55% and put penalty premiums on top of that for companies with distressed plans. At the heart of the pension deception are the fantasy assumptions about rates of return on their pension assets and the smoothing of returns by averaging several years. That is pure bogus accounting. Corporate America has deliberately screwed their employees. We know of no other way of describing this human disaster. Bogus unemployment numbers are 4.2% yet, Gallup tells us that only 3% of Americans describe the economy as excellent and only 33% describe it as good. Our FBI has in its files 1,173 pages of internal documents on the ACLU and 2,383 pages on Greenpeace. The main push today as we see it is mostly against left-wing groups, but you can bet they are watching the right as well. Most of the memorandum was compiled by counter-terrorism personnel in the FBI’s Los Angeles office. The Bureau of Labor Statistics has owners, equivalent rent of primary residence, which is supposed to represent housing prices plus real estate taxes, up only 2.2% y-o-y. The housing industry and the Rockefeller Institute have housing prices up 12.5%. That puts the CPI, the Consumer Price Index, up over 6%. The BLS has medical costs up 4.2% and in reality they are up 10%. As you can see government statistics are deliberate lies. The average initial mortgage payment for homebuyers has climbed to $2,338 in the first quarter from $2,060 in the fourth quarter as wage increases have barely risen. Home price appreciation has outpaced income growth in 38 of 50 states in the year-to-year period ended in March. Only 16% of California households can afford a medium-priced home, the lowest level since 1989, which was the beginning of the last real estate collapse. In 1989 the average 30-year fixed rate mortgage was 10.33%. All the signs are right before your eyes. This time will be no different. Over the next year the real estate market will again begin a major decline. It did not take long, last week three senate committees, in the face of London bombings, voted to extend the power of the FBI under the Patriot Act to obtain library records without subpoena. Who cares what anybody reads. Why aren’t these idiots collecting illegal aliens and deporting them and why are they not reviewing every wire transfer from Swiss and Pakistani banks? A tidal wave of corruption may ensure the Iraqi army and police will be too few and too poorly armed to replace American and British soldiers fighting anti-government insurgents. This will frustrate plans for the withdrawal of forces. The Iraqi armed forces are full of ghost battalions, in which officers pocket the pay of soldiers that never existed or have gone home. There are not 150,000 Iraqis in the security forces; the figure is probably 40,000. The corruption is widespread and runs into billions of dollars and we get to pay for it. 10% of hedge funds have problems, but that is all it takes to start a panic. There are already some heavy losses in these unregulated offshore hedge funds and some of the derivatives trading desks of banks. Yes, the problems are in small and medium sized funds but their failure could affect the whole market. We have already seen major losses at Bailey Coates Cromwell Fund, Marin Capital and Amin Capital in three different parts of the world. Even Union Bank Suisse has lost several hundred million dollars. Then there are two of the 16 hedge funds of GLG Partners that are taking stiff losses. Compounding the problems of all of the above is once losses begin investors sell compounding the funds’ problems. Losing a billion dollars here and a billion dollars there tends to add up to a shortage of liquidity and forced selling and forced losses. The losses in many brand name hedge funds are running at 20 to 25%, which has been unheard of. What has happened in the past, as in the case of LTCM, was that volatility wiped out probability and the financial house came tumbling down. We can promise you that will happen again. We have a financial system that is already five years into systemic collapse and there is little the elitists can do to stop it. If you build the framework for disaster it will come. You just have to be patient and stay out of harms way. There is no conundrum or mystery. Investors are seeking a flight to quality and that is why you are seeing higher Treasury prices and lower yields and gold prices in the over $400 range. That flight is prompted by many things and one recent event was the problems at GM, which have really only just begun. The EU can be of little assistance. Most of its members are either in or close to recession. There is no longer any security for the present world monetary-financial system. Bonds are no longer the answer unless they are backed by gold and few currencies are. Survival of principal should be your foremost goal. That means, buying and holding gold and silver related assets. If you do not have them, you will lose the majority of what you now own. Earlier we predicted that the privatization of Social Security would add $1 trillion to US debt over 10 years. Now the Social Security actuary says it will increase debt $851 billion over 11 years. The House bill calls for establishing personal retirement accounts for workers under age 55 and stocking them with Treasury bonds equal to the surplus Social Security taxes the government will collect through 2016. Next year alone the program expects to receive $84.5 billion more in payroll taxes then it needs for monthly benefit checks. Essentially what we have here is a three-card Monte game. Switching one batch of Treasury promises to pay for another pile of fiat paper and in the process creates about another $1 trillion in debt. In addition funds would be diverted from payroll taxes. The amount is yet unknown. The bill has 34 Republican sponsors and no Democrat sponsors. Accounts would increase the annual budget deficit and the national debt, two things the bill’s sponsor Rep. Jim McCrery and his co-sponsors said at a June 22 news conference their legislation would not do. The real underlying problem is Social Security has been a pay as you go system since its inception. Politicians from both parties have looted the system. What is offered in the bill is a solution for a political win by Republicans, because one batch of worthless paper is being exchanged for another. 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GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS The rigging of the gold price, initiated in earnest by Robert Rubin, former Treasury Secretary and now head of Citicorp, will go down as one of the greatest blunders in US financial history. It skewered every aspect of the financial markets setting in motion the total collapse of the world monetary system. The Republicans have in the past five years managed to make the situation even worse. India has an insatiable penchant for gold as has been proven over and over again. The Finance and Commerce ministries have done little to expedite direct gold trading since they gave approval in 3/03. Regulatory approval is being held up and the regulators refuse to say why. Our sources say it is due to India’s dominant position in the cash market and upon instructions from the US government. We are now told that the Mineworkers Pension Fund in South Africa is falling at such a rate that in two years members’ retirement could be severely reduced. NUM members in the coal industry no longer want to support other union members in the gold sector and subsidize their pension payments. The ECB has again announced a 77 million gold sale last week, 6.62 tons at the new book value. This is close to last week’s sale of 6.54 tons, and a third of the June average. We are told that they will be completed in August, having slowed the volume of sales. The Shanghai branch of the Industrial Commercial Bank of China has launched spot gold trading. There will be 10-months of trial operations. The minimum purchase volume is 1,000 grams, much higher than in other forms of gold trading. The “gold passbook” system only requires 10 grams of gold per trade. The ICBC is after the high end of the market. Russian gold production fell 3.5% y-o-y in the first half of 2005 to 59.66 tons. Secondary production grew by 13.4% y-o-y to 6.307 tons. By-product output fell 10% to 4.993 tons. Mine production fell 4.6% to 48.363 tons. CHINAEconomic growth picked up in the second quarter with GDP up 9.5% after being up 9.4% in the first quarter. The first half trade surplus reached $39.6 billion, surpassing the $32 billion reported for all of last year. We could see a $100 billion surplus for the year. This should most certainly push the US Congress to impose trade tariffs on all Chinese goods. In the first half retail sales rose 13.2%. The first quarter was up 13.7%. Appliance manufacturer Haier America has ended their bid to purchase Maytag. H1 fixed asset investment was up 25.4% y-o-y in the second quarter. China has one set of rules – their rules. Remember this is still a totalitarian society run by Marxists. Nobel Prize winner in economics, Joe Stiglitz says China’s huge financial surge year after year began with the government’s funding rural cooperatives, fledging industry protected behind high trade barriers. There are only elements of capitalism in China. Rich communists run everything that is worth running. China has slave labor and does not use free market economics. That is how they crucify world markets. As long as cheap Chinese goods inundate our country and waves of illegal aliens walk across our borders, American wages will continue to head down to third world levels. As long as Wal-Mart and a cast of elitist internationalist corporations buy goods produced by the Chinese military and prisoners, our economy will continue to head toward oblivion. Urban unemployment remained at 4.2% in the second quarter. Retail sales rose 13.2% y-o-y versus 12.8%. Real estate investment rose 2.1% in June. The number of phone users rose to a record 700 million on June 31, 2005 – 335 million were fixed line and 363 million were mobile phone users. More for subscribers.... SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $129.95 U.S. Funds. Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. Please include name, address, telephone number and e-mail address. We accept Visa and MasterCard charges. Provide us with your card number and expiration date. We will charge your card US$129.95 for a one-year subscription. Note: We publish twice a month by surface mail or 3-4 times a month by E-mail. Correspondence to Bob Chapman international_forecaster@yahoo.com, or for subscription information IF_distctr@yahoo.com Foreigners please use foreign U.S. dollar denominated checks or Money Orders. *****
-- Posted Tuesday, 26 July 2005 | Digg This Article
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