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International Forecaster August 2008 (#8) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster



-- Posted Wednesday, 27 August 2008 | Digg This ArticleDigg It! | Source: GoldSeek.com

The following are some snippets from the most recent issue of the International Forecaster.  For the full 20 page issue, please see subscription information below.

US MARKETS

...

          What kind of economic agenda will we end up with this time?  Will it be tax and spend (which is usually characteristic of Jackasses), or spend and inflate (which is usually characteristic of Dumbos)?  To be sure, it will be a whole lot of both, unfortunately.  The magnitude of financial losses are going to be out-of-this-world, and increased taxes and inflation (itself an insidious stealth tax) will be the inevitable byproduct.  All the big institutional players are interconnected.  When you bail one, another goes under.  When you try to bail the one that just went under, you create havoc for even more players.  There are two sides to many trades involving options, futures, swaps and other financial derivatives, and if you help one side of such trades, you are going to hurt the other.  Just like we had a daisy chain of fraud underlying the dot.com, real estate, subprime and credit-crunch debacles, we will now have a daisy chain of defaults and bankruptcies that will totally swamp and wipe out the whole gamut of corporate, economic and financial systems.  The losses will eventually reach into the tens of trillions once the credit default swaps and interest rate swaps, whose notional principal now tops one quadrillion dollars, add their damages to the already gargantuan, ever-increasing, ever-accumulating losses from declining real estate values, from crashing and burning stock markets, from what will be the biggest bear market in bonds of all time caused by double digit interest rates and hyperinflation and from piles of subprime, Alt-A, Option ARM, Jumbo and Prime mortgage bonds and derivatives in thermonuclear meltdown.  Then add in monumental losses from such things as bank failures, corporate bankruptcies, hedge fund implosions, totally sucked-dry governmental and non-governmental insurers of bonds, pension funds and bank deposits like Fannie Mae, Freddie Mac, AMBAC, the FDIC and the PBGC, destroyed pension and endowment funds and municipalities in total breakdown.  For good measure, throw in lost wages that would have been otherwise earned by one out every three Americans who will eventually be unemployed, lost tax revenues from losses and reduced income and lost consumer spending and corporate profits from a flagging, tanking economy, and you have behemoth losses that are quite simply too big to be bailed, either by taxpayers or otherwise.  As a result, all of our socio-economic and political systems are doomed for chaos and revolution.  Out of this chaos, the elitists hope to mold the ultimate feudal system, by nationalizing everything they can to form a corporatist, fascist state that would surprise even George Orwell, whose Big Brother society is only a quarter century off the mark.  We believe that their efforts to bring this about will fail miserably.  They have defeated themselves.  Their own greed and avarice, coupled with their own stupidity and arrogance, as well as their violence against, and lack of fair dealings with, non-Illuminist nations is going to bring them down.  You had best have a whole pile of gold, silver and their related shares when the Illuminist "House of Usher" comes crashing down around their ears.  You will not find financial safety and stability anywhere else, except perhaps in Swiss government bonds denominated in Swiss francs and perhaps some commodities such as oil and agricultural products.  Freeze-dried food, weapons and ammunition are also a must.

 

...

 

There is a good chance over the next year that more than 100 American banks could fail. This could be failures’ aggregating more than $100 billion. The question is where does the money come from to pay for this because the FDIC has maybe $29 billion left after they cover current bank failure loses. The banks, who are members, cannot contribute to any extent so the taxpayer will have to fund the losses.

 

We were just informed about how major brokerage firms get around being bought in on illegal naked shorts. Often another brokerage house is their prime broker for stock borrowings, and those short would get a failure to deliver warning from the lending broker, which eventually buy them in and shortly after they would have somebody watch the level 2 screen for the huge buyer of the naked short shares. They would hit the bid hard and sell effectively neutralizing the buy in. this process can be used indefinitely. The SEC knows this, so why don’t they stop it?

 

We mentioned some time ago that Massachusetts’s residents will vote on whether to cut their 5.3% state tax by 50% next year and 50% in 2010. Six years ago residents voted for the same issue getting 45%. That was in better economic times. Today voters are angered by mindless, bloated spending and politicians catering to rich corporations and the wealthy.

 

North Dakota will decide on a 50% reduction in state taxes; Nevada to restrict property tax increases and Minnesota to raise sales taxes by 3/8%.

 

In Massachusetts the measure would return an average of $3,700 to each of 3.4 million taxpayers.

 

Overall Americans are just disgusted with the immoral actions of elected representatives. Who can blame them, although problems are far greater at the federal level?

 

Home prices have declined 20% to 50% and property taxes have not declined in many areas.

 

These actions tell us people are fed up and well they should be. Again except for Ron Paul vote them all out of office. We predict the vote in Massachusetts will carry and many other states will follow.

 

...

 

Every day all we get from Wall Street and Washington is obfuscation in addressing the systemic nature of the problems we face in the economic and financial spheres. The UDS Treasury and the Federal Reserve are only interested in saving their Illuminist friends in banking and on Wall Street. Bear Stearns is just a warm up for what is in the works. There are much bigger shocks on the way. The parasites are still feeding on the host rather than laying out an overall plan for financial survival for our country and for that matter the world.

 

The systemic problem is there but the problem is that Wall Street and Washington won’t admit how insolvable the problem is. They continue to try to put the problem out into the future. That solves nothing. We are seeing ideas like changes in the bankruptcy laws that would allow troubled companies to continue to function. Criteria would be set to see which would be allowed to survive and which would be allowed to fail. This is government by regulation, the cornerstone of National Socialism, or fascist government. Next it will be who will be allowed to live and who will be allowed to die.

 

The economy is imploding. The contraction is gaining momentum, thus, the recession deepens. The mountain of debt is taking its toll. Real estate prices – residential and commercial – continue to collapse, as credit to households and businesses dries up. Default rates create more losses, which trigger further defaults.

 

The economy is being kept afloat and the raging debt liquidation has thus far been neutralized. That will not continue indefinitely. Creating money and credit is a drug on the economy that does little to improve the economy.

 

Until the truth is told to the people there will be no solution. Every dollar’s worth of money and credit created compounds the problem. As long as we allow Wall Street to rule the American people we are headed toward disaster. Our entire society is now designed to enrich the rich, at the expense of most of Americans. We are allowing the Illuminists to destroy us.

 

Over the past two weeks gasoline prices have fallen $0.15 to $3.70 a gallon.

 

Arizonians must have been paying off bills with their stimulus largess. Total taxable retail sales for January through July were $30.7 billion, off 7% yoy. Motor-vehicle sales fell 23% as auto supply and repair fell 17%. Furniture was off 9.6%, clothing 7% and food and liquor 3%, up was agriculture and mining gaining 13.7%. General merchandise fell 2.5%. Gas sales fell 0.8% and 7% in July. Up were florists, pharmacies and office and specialty stores. This gives you an idea of what the general economy is doing and what affect the stimulus package had. It has recession written all over it.

 

The main reason for the Fannie Mae – Freddie Mac bailouts, other than the fact they are bankrupt, is that the collapse of credit swaps (CDOs) are exponentially larger than the underlying debt. They are as much a derivative problem as they are a bankruptcy problem.

 

This is part of a huge derivative arena where participants buy and sell insurance to protect against defaults by issuers of debt. About $62 trillion in insurance has been written, with a fair value of $2 trillion at the end of 2007.

 

What this is all about is major investment banks like JP Morgan Chase, Goldman Sachs and Citigroup wrote this insurance and they do not have the money to pay those who bought it. Fannie and Freddie go under, thus the bailout.

 

All derivatives, both exchange listed and OTC globally are in excess of $1.2 quadrillion as of the 1st quarter. Can you imagine what that means to the entire market place? See what happens when we do not have real regulation or no regulation at all.

 

...

 

THE INTERNATIONAL FORECASTER

WEDNESDAY August 27, 2008  -   082708(8)_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 Addresses:

international_forecaster@yahoo.com

if_distctr@yahoo.com

CHECK OUT OUR WEBSITE

www.theinternationalforecaster.com

 

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Note:  We publish twice a month by surface mail or twice a week by E-mail. international_forecaster@yahoo.com or if_distctr@yahoo.com

 

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-- Posted Wednesday, 27 August 2008 | Digg This Article | Source: GoldSeek.com



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