US MARKETS

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The systemic problems we see, such as subprimes, ALT-A’s and Pick & Pay mortgages, plus the semi-frozen credit markets, obscure other debts that are off balance sheet and no one knows how the banks will be able to honor them. They come in all forms – creditors and debtors. The banks, insurance firms, private equity funds, investment bankers, brokerage houses, hedge funds, mutual funds, money market funds, pension funds, holders of CDOs, SIVs, MBSs, junk bonds. This is a combination pyramid and Ponzi scheme. As a result the dollar is falling but the future of every currency in the world is in jeopardy to a varying degree. When measured against gold they are all in trouble and have been for over three years. Even Eurozone members are financially adrift. In just six months banks have lost $1.5 trillion in assets and at least that much has been lost in world stock markets. Trying to solve this long simmering crisis by using a hyperinflationary flow of money and credit is pure clinical madness. Wait until you see the blowouts in the market insurance and in derivatives. 2008 will be a far worse year than 2007 and the years to follow will be even worse.

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What Wall Street did was turn a $1 mortgage debt into $3 in securities. The game wasn’t selling houses, but selling mortgages to fuel the securities business. The real money wasn’t in the loans, but in the speculation they enabled. It was all a fraud and the keys to the fraud were the Fed and the rating agencies. The mortgage-backed security itself is a new debt, whose repayment is said to be backed by the income stream from the payments on the mortgages in the pool. But, that is not quite true, since the mortgage payments are already spoken for, as the repayment with interest of the original mortgage loan. All the buyers of the MBSs really own are a bond backed by the company that issued it. This method supplies more money for mortgages and the debt from the mortgages is used to fuel the securities machine. The same scam has been repeated with all sorts of debt from credit cards to corporate loans, creating a giant pyramid scheme of assets to be bought and sold. The game is an illusion.

Now that the market is all but frozen the rolling over of this mountain of existing debt becomes paramount. If credit doesn’t appear and the debt cannot be rolled over, defaults will soar, crippling the debt market and blowing up the credit derivatives market. When that happens assets will have to be sold for $0.20 or $0.30 on the dollar. As we have said before, the central banks are desperately trying to buy time to figure out what to do The trillions injected into the system that is being rolled is only a holding action. The central banks are accepting BBB securities worth at best $0.30 on the dollar at full value so the owner of this toxic garbage won’t have to sell into the market, which would trigger an avalanche of writedowns. Thus, taking the whole system down. This is why we have talked of the nationalization of banks, investment banks, brokerage houses and insurers. What else would any self-respecting corporatist fascist do? It should be noted that this is what we expect the ECB to do with all the dollar denominated paper in Europe. This central bank bailout will cause hyperinflation and the losers will be US, Canadian, UK and European citizens. As we have written before the Fed is looking at provisions in the Federal Reserve Act, which would enable it to act as a lender of last resort. Here we have a dead system in which these crooks are trying to hold it together hope against hope. The result will be hyperinflation, higher gold and silver prices, a lower dollar and austerity and depression. We believe the system is irretrievable and it will collapse and these crooks finally will get their just deserts.

Our economy really hasn’t been healthy since the mid-1960s. The excesses were already showing up and we were collecting 90% pre-1964 silver before the public knew what was going on. We have had 40 years plus of monetary and fiscal profligacy and it is finally in its end days. Yes, the elitist’s greed got in the way. They had the best environment ever to be successful and screwed it up. Now we have a crisis of confidence and trust, which is so bad that public meetings have to be held with the “Working Group on Financial Markets” to let Wall Street, corporate America and government know that it is not too late. The elitists should have never turned our banks into loan sharks and they should not have preyed on fellow bankers. Now they have to go humbly to sovereign funds to get cash infusions at outrageous interest rates to keep from going under.

All that time the consumer has been holding up the economy, continuing to buy whether they had the income or not. They represent 72% of GDP. Those with good credit now are being paid in different ways to continue to use that credit while those at the bottom of the chain are spent out. The pyramid, the bubble gets ever bigger.

We now are entering the era of the duct tape economy. From here on out it will be one problem after another. Finally a few years from now probably due to incessant hyperinflation – the game will be over and the system will collapse. Even if it doesn’t collapse it will drone on for years mired in stagflation. Never ending economic misery.

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GOLD, SILVER, PLATINUM, PALLADIUM AND URANIUM

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The stock markets have developed a severe case of yellow fever.  Between gold and the yen they do not have a snowball's chance in hell of sustaining any kind of rally.  The Yen Death-Star has once again detonated, and this yen hit on the carry trade is not necessarily on account of the cartel, as many other factors are at play here, but the cartel is happy to just let it become Super-Yen because the Barbaric Relic and the Silver Surfer are on a rampage of their own, and the cartel needs Super-Yen to prevent a total bloodbath for its gold-shorting cohorts.  The oriental traders are fleeing to yen money markets and Japanese bonds the way we foolishly flee to dollar money markets and treasuries, thereby driving the yen upward.  The mom and pop Japanese are getting margin calls at home and here in the US and are likely to be giving up their yen shorts on the CME which are getting fried as we speak, adding further fuel to the yen's rocket propellant.  As well, there is an ongoing de-leveraging of the carry trade as large specs reduce their exposure to stocks, bonds and derivatives in order to take greater advantage of the rally in precious metals.  Here we are at 7:30 am EDT on Wednesday, watching as the ever-tanking US economy sends oriental stock markets into a deadly tailspin while they crash and burn like the Hindenburg.  We are about to join them and go down in a blaze of glory as the yen is now at 106.179 yen per dollar and 156.933 yen per euro.  Now mind you that Friday evening at about 7:45 pm the yen stood at about 108.980 and 161.193, so in only two trading days the dollar has dropped by almost 3 yen and the euro by over 4 yen, so the PPT certainly has its work cut out for it as this catastrophic decimation of the carry trade is only going to get worse while the oriental markets continue their death spiral down.  So much for emerging countries supporting the world financial system as the US super tanker begins its long slow descent into the deep, dark depths of the Ocean of Money and Credit created by the Fed and our "beloved" government.  Even the mainstream media now seems frightened and they are starting to talk about the fact that the Fed is boxed in because raising rates kills the economy while lowering them kills the dollar and ignites inflation.  We have been talking about this scenario for over two years, and now finally even the dolts in our moronic media outlets are starting to get it, so you know it has to be pretty bad.  Between dismal holiday retail sales and disastrous reports from both  Citigroup and Intel, the fluff puffed in as a shock absorber on Monday by the PPT despite some amazing yen strength was completely and immediately vaporized on Tuesday and the process of vaporization will continue today.  The cartel is so concerned about gold blowing them in and exposing their plans to bring down our economy to lead us into world, or at least regional, government that they appear to be willing to give up their final blow-off top in the stock markets.  Even if by some miracle they are able to pull that off later with huge rate cuts and M3 in excess of 20%, gold will be far north of 2000 by the time they get there so they will not be getting it on the cheap like they had hoped.  This puts a major crimp into their plans for the final rip-off which entails the purchase of distressed assets at pennies on the dollar as the Much Greater Depression lowers the boom on the corporate and financial world and as the derivatives volcano erupts, incinerating everything in a blaze of pyroclastic glory.  And if you think that 30 to 60 percent declines in real estate are bad, wait until you see what happens to real estate values as deflation sets in while this depression of company-crunching magnitude starts its reign of terror as interest rates and inflation move into double digit territory!  If you don't own gold, you're toast!

The Barbaric Relic and the Silver Surfer have once again been spectacularly unimpressed by the Super-Yen and tanking stock markets, unlike in days past when these events would have knocked the stuffing out of them.  Now instead all this financial turmoil sends traders running to them for cover as the only safe-havens worth even considering as bond yields drop into the tank.  Bond yields have been 7 to 8 percent below inflation levels anyway, so why anyone would consider parking their money in these totally useless dollar-denominated assets as the dollar gets taken to the woodshed is certainly beyond us.  This is simply raving incompetence on the part of financial managers everywhere who most certainly should have known better.  Their failure to properly diversify into the precious metals in an obvious atmosphere of growing inflation will be the subject of many a lawsuit after pension plans, insurance companies and hedge funds lose trillions over the next several years, culminating in the Much Greater Depression.  The Relic and the Surfer will now take a well-earned rest as they prepare for a climb to new heights.  This rally is just getting started.  Those large specs who have followed our advice are now reaping their rewards as their protective derivatives pay off beyond their wildest dreams while they make a fortune in gold and silver.  Lease rates have come way down as the cartel panics that even a strong yen cannot stop the dynamic duo from their inexorable rise upward.  Before this latest siesta for profit-taking, the dynamic duo set a series of all-time or 27 year records on Monday.  Spot gold hit 914.30 intra-day and closed above 900 for the first time at 901.90, both all-time records.  The gold futures most active contract (February) closed at 903.40, and went as high as 916.10 on Tuesday, both also all-time records.

Also on Monday, not to be outdone, the XAU hit an intra-day high of 199.25 and closed at 197.23 while the HUI hit an intra-day high of 489.49 and closed at 480.99, with every one of these figures being all-time highs.  Silver set new 27 year highs on Monday with a close of 16.29 after hitting a high of 16.60.  This has all happened despite the largest mountain of shorts ever, with the COMEX gold futures open interest reaching 592,295 on Monday, an all-time record, a record that will be broken in short order as the 600,000 mark is surpassed for the first time ever in very short order.  The gold and silver shorts are being buried alive as the Relic and the Surfer continue to pile on the dirt with earthmovers.  Their losses are simply horrendous and in this credit-crunch atmosphere we can see some bullion banks going under as insolvency kicks into overdrive while derivative losses eclipse even the COMEX and TOCOM losses. When they go under you will see the central banks panicking because all that gold they leased out to the bullion banks will have to be written off and the real status of gold reserves will be exposed, namely, that there aren't any!!!  Paper gold reserves are about to be vaporized, and this will cause mass panic for holders of dollars, euros and pounds as the gold reserves they thought were securing their money are found to be virtually nonexistent.  Mass panic will ensue as bank runs like those on Northern Rock and Countrywide kick into hyper-drive and gold and silver become the new world currencies, not the dollar, not the euro, not the pound, not the yen, not the yuan, not even the Swiss franc and certainly not the diabolical amero!  So buy some gold and silver before they become the next "untouchables" as the price of owning them soars into the ozone!     

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THE INTERNATIONAL FORECASTER

WEDNESDAY JANUARY 16, 2008 -  011608(5)_IF

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-- Posted Thursday, 17 January 2008 | Digg This Article