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International Forecaster November 2007 (#6) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

-- Posted Wednesday, 21 November 2007 | Digg This ArticleDigg It! | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 18 page issue, please see subscription information below.


WEDNESDAY  112107(6)_IF

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 Address:








We have often reported that since 8/15/71 it has been all down hill for the American economy. That is the date we left the Gold Standard. Since then there has been a decline in the purchasing power of the dollar. A decline that has forced a need for two incomes to replace the one income that was needed in 1970. What has been in process during the last 37 years is the disappearance of our middle-class and the limited ability to reach middle-class status. Our fiat currency has brought us decline and will eventually bring us impoverishment.


Our low and moderate-income earners have been virtually shut out from upward income and social mobility. Those with high school educations or less are confronted with stiff competition from illegal aliens who are promoted by our President and part of Congress. Their wages and purchasing power has been decimated and business and corporate profits have exploded. It’s nothing less than a form of corporate enslavement. Those who go to university and put themselves into debt find those good paying jobs under free trade and globalization have been offshored or outsourced to some distant land. During the reign of George II the availability of decent jobs has fallen dramatically as corporate earnings hit new records. We might also add that the rich never paid so little in taxes. Making matters worse 85% of new jobs available do not offer health care or pensions. People cannot make ends meet and will have to work until they cannot anymore. This is not a pretty picture, but it is a realistic one.


Employers do not even have to offer a livable wage. There are plenty of illegal aliens or people in China, India or Mexico who will do the job for less. Labor unions are almost extinct and workers overall have little bargaining power. We often see college graduates earning $32,000 to $50,000 a year. As we look back 1945 to 1971, were the golden years of employment and upward mobility. Hard work, brains and education are no longer a ticket to a better life. This is why we promote an end of illegal immigration and a reintroduction of protective tariffs, because without them we cannot survive economically, financially and culturally. Above all in addition we badly need a major political upheaval. Most Republicans and Democrats in national office are either bought off by campaign contributions or are compromised. We need a third party to break what is essentially a one-party monopoly.


We have to stop H1B type programs because they are used to bypass American workers so business can hire foreigners for 1/3 to ½ the cost. The program should be terminated. High usage of such workers reduces the bargaining power of American workers. It keeps them from acquiring higher wages that presently do not keep up with real inflation.


We have many with university educations just sliding by and surviving. That is terrible, but what is worse is the plight of American citizens at the bottom of the employment totem pole.


Banking and Wall Street like things the way they are – they do not want change – because it cuts into corporate profits. They want low interest rates, a cheap dollar, unlimited immigration and few regulations. They do not care if living standards improve for the masses. All they care about is how much money they can accumulate.


The right man for our time, now, is Ron Paul. He can take the average American where we all want to go and that is to prosperity and freedom. In the process in our primaries we have to defeat every incumbent so we can get the refuse out of Congress.


Since 1971 the Fed and Wall Street have brought us one calamity after another. The most recent were the stock market collapse early in this decade, and now the real estate collapse, both of which we were fortunate enough to have predicted. The Fed created both bubbles in collusion with government intervention, real estate, mortgage lending and the investment banking industry, including the rating agencies. This was one of the greatest scams of all time just to keep the economy from collapsing. The result is a monumental real estate collapse, a plunging dollar and an ongoing credit crisis. In addition, we have a collapse of complex structured assets. This is accompanied by collusion of government with Wall Street, banking and the Fed to bail out their friends and to again allow the American public to pay the bill. They even want a public bailout if they can get away with it. It wasn’t but several generations ago that bankers had unlimited liability and before the “Great Depression,” bank shareholders did as well. Due to changes banks entered the casino business. They now could care less about asset quality or liquidity. If they get in trouble they just go to the Fed, which manufactures credit and get bailed out. Banks now play fast and lose and reap great profits and when they fail they get bailed out. As we have just seen again like in the 1920s and 1930s, universal banks should never have been allowed to be recreated by the destruction of the Glass Steagall Act. If you reach back 13 years you will find the National Partners in Home Ownership, was formed to increase creative financing methods for mortgage origination. As a result you saw what happened over the last five years. The totally unqualified were given mortgage loans by the millions. There were no regulations and no controls. Now look at the result. A disaster that will take America into depression. The Fed, the originators, the lenders and the investment banks should all be under indictment. That won’t happen; too many of them are Illuminists. Next the bond insurers will go under – all they have to do is raise more capital, which rating services gave them the time to do, with all the bailouts, lots of companies will fail over the next year and that will expedite the recession.


It was bad enough that bankers made the poorest loans possible but worse was that the change in lenders’ standards caused contagion and lack of trust and confidence throughout the system. The ultimate results of such a loss of faith is a reduction in the availability of credit, irrespective of how much is made available by the Fed. Then as soon as the Fed loses control, deflation begins. The Fed will attempt to prolong that day as long as possible. This is already borne out in part by banks tightening credit for all borrowers. You will see this episode played out over the next few years.


Over half of Americans are living in a state of denial. They want to believe tripe on the nightly news, and the pronouncements by Treasury Secretary Paulson that the real estate collapse and the credit crisis are contained. The still low interest rates have allowed Americans to continue to function albeit buried in debt. They are terrified about falling house prices and the fear that their credit card lines will be cut back. They are concerned that we may be in recession and that their job may be outsourced overseas. They say nothing, they watch and hope. They are fearful of our government and our system. They are afraid to speak out.


Some are beginning to realize that the Fed forced trillions of dollars into the financial system so that the economy wouldn’t collapse five years ago. The result was a housing bubble that kept the economy from collapse and the elitists away from exposure of what they were doing.


We are headed toward another great depression and Americans are occupied with sports, movies and DVD’s, as well as totally managed news. They are not concerned that millions of jobs have been lost to illegal aliens and that their college graduate children cannot get jobs because they have all been outsourced to other countries.


We have hundreds of thousands of veterans living under bridges. Our VA is overwhelmed and doesn’t have the funding to help these mentally and physically wounded. Our own medical system is in chaos and costs a fortune, as the drug companies and their shareholders get richer and richer.


Business and corporate interest revel in the slave labor on our street corners, a product of our failed trade agreements. The corporations hide behind their corporate cover reaping in profits much of which remains offshore, so it can be taxed again at 5-1/4% to get it to return to America. A few are benefiting obscenely at the expense of most Americans.


America has no pride left; it has become a nation of con men and crooks. Only the poor and habitual criminals end up in jail. We are about to lose our machine tool industry completely. Those who could train our young are dying off. If we do not act soon and elect Ron Paul and defeat the incumbents in the primaries there won’t be anything American’s can be proud of, like our manufacturing, tool and die shops, steel mills, etc., which have long ago left our shores. America is asleep and it had better wake up soon. We are the Titanic and if we do not change course we will be in permanent trouble.




Large specs who have followed our advice have made an absolute fortune. Not only have they made a ton of money in gold and silver and their stocks, but also their protective derivatives have now paid off handsomely as well.  In mid-September of this year we warned large specs about yen-hits on gold and gave advice as to how to protect against them, namely, the purchase of protective derivatives such as yen calls against the dollar and stock index puts.  At the time, the Dow was in the middle between 13,000 and 14,000 and the yen was at about 115 yen per dollar and about 160 yen per euro.  We advised that they should buy these protective derivatives all the way up during any stock market rally, which rallies are now only possible when the carry traders have extra liquidity from a weakened yen, so that they could make money all the way back down in the event that the cartel used market-crashing yen hits to manipulate gold downward.  The objective was to obtain profits from these protective derivatives during a stock market crash and carry trade unwinding that could be used to cover margin calls on long stock positions instead of using the liquidation of precious metals positions.  After we published this strategy to protect large specs, the Dow climbed to about 14,200 and the yen weakened to as much as 118 yen per dollar and 167 yen per euro as the Dow peaked.  The Dow has since reversed due mainly to a series of yen-hits on gold meant to squeeze large specs out of their precious metals positions first as gold took out 730, and then again when gold threatened to take out 850.  On Monday, the Dow was as low as 12,937 and the yen was as high as 109.753 yen per dollar and 160.893 yen per euro, so you can see that these protective derivatives have become very valuable for those who followed our advice.  We further believe that these protective derivatives are one of the primary reasons why gold has been able to rally so strongly despite continual attacks by the cartel, since the large specs have much more staying power now when the stock markets and yen carry trade are turned against them.


We might also add that we were the only newsletter writers, in fact we were virtually the only writers of any professional publications concerning the precious metals markets, who cheered gold on after it took out the 2006 high of 730 on September 21 of this year.  Everyone else cowered in fear at the mountain of shorts, which the cartel had set up on the COMEX and the TOCOM.  Not only were we not intimidated, but unlike all the other writers, we became proactive and suggested a strategy to help large specs beat the snots out of the cartel after diagnosing how the large specs were being punished and pounded by the cartel every time gold started to rally.  We do not just write about gold, we promote it unashamedly, because gold is the only trustworthy barometer of actual economic conditions that cuts through the lies of the cartel and its Illuminist masters.  This publication is not just about finances and making money, it is about good triumphing over evil.  It is about promoting the truth in order to expose harmful lies.  It is about defeating the cunning, sinister malefactors of society who would hurt, abuse and take advantage of those who are more open and honest, who are less cunning and who are less fortunate.  


Most other writers have also been apparently oblivious to the many changes in market forces, which have taken place since the mid-August precious metals bottom.  Apparently, these other writers do not believe what they preach.  The three major factors now driving gold changed dramatically in mid-August after the big hit on precious metals and their stocks.  In mid-August, the dollar peaked, oil bottomed and the flow of credit was accelerating.  Since then, these three market situations have completely reversed.  The dollar has been abandoned, reaching an all-time low, and continues to plummet.  Oil is continually setting all-time highs and now threatens 100 and has broken past 99 as of the time of this writing.  The credit-crunch has replaced the free flow of credit and has gradually worsened to the point where it currently threatens a complete systemic breakdown of the entire system of financial markets.  These are all a direct result of the Fed's moronic and profligate policies engendered during Greenspan's Folly and which are now being continued by the new Fed Chairman, Helicopter Ben.


The skyrocketing oil and the plummeting of the US dollar are intertwined and have been directly caused by a host of factors. Chief among them are stagflation resulting from the ruination of our economy by global free trade, off-shoring and outsourcing, profligate spending on wars for profit, a monstrous trade deficit that continues to increase monthly, an out-of-control and growing national debt and the interest being paid on that debt, ludicrously low interest rates which have fostered speculation in all financial markets and a super-heated money supply which the Fed has used to stave off the recessionary effects of the bust which was the result of another bursting Fed bubble.  And since oil has been priced in dollars following Nixon's termination of the Bretton Woods Agreement in 1971, every time the dollar dives, the price of oil rises in terms of dollars in order to maintain the purchasing power of oil.  This creates a vicious cycle of stagflation where a drop in the dollar increases the price of oil, which adds to the cost of goods and increases their prices, thus causing further inflation and more declines in the dollar and more increases in the price of oil, while at the same time cutting into corporate profits and increasing the trade deficit, thereby driving the economy further and further into the ground.  Adding to the rise of oil is the fact that peak oil has come home to roost, as per the designs of the Illuminists.  The big oil interests among the Illuminists have not done any meaningful oil exploration and have not constructed any new refineries since the 1970's with the blame being placed on environmentalists who have been funded by the Illuminists themselves to prevent oil exploration and to kill oil, coal and nuclear power.  The Illuminists have also bought and shelved or otherwise hindered new inventions pertaining to greater energy efficiency.  They have done all this knowing full well that the output from existing oil fields was rapidly declining.  So now everyone wonders why the demand for oil exceeds its supply when the answer could not be more obvious.  How dumb can people be?  Gold is the perfect hedge against these problems as a safe-haven, as an inflation hedge and as a store of value, which has made gold very attractive to investors and which has helped to power the current rally in precious metals.


The credit-crunch is the result of a complete lack of regulation by the Fed in bond and derivatives markets and in the mortgage lending markets.  The Fed and Wall street intentionally conspired and colluded to foster ridiculously low interest rates, adjustable rate mortgage loans, mortgage loans with no down payment, subprime "liar" loans, bogus ratings of bonds and derivatives related to subprime real estate loans, use of subprime bonds and derivatives in institutional investing and international banking where they are completely inappropriate, off-shoring of subprime bonds and derivatives to SIV's, and unbridled leverage in the purchase of these and all other types of bonds and derivatives, including credit default swaps and interest rate swaps, most of which are completely naked.  And traders wonder why we have a credit-crunch?  We wonder why we do not yet have a complete disaster on our hands.  The truth is that we do in fact have a complete disaster on our hands, but that it has not yet fully manifested itself.  It is a miracle that this whole fiasco has gotten this far without a complete blowup.  All professional traders know full well that gold is the perfect safe-haven against the coming economic catastrophe, more of which manifests itself every day, and this has also added power to the current gold rally.


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-- Posted Wednesday, 21 November 2007 | Digg This Article | Source:

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