-- Posted Wednesday, 10 December 2008 | Digg This Article
| Source: GoldSeek.com
The following are some snippets from the most recent issue of the International Forecaster. For the full 29 page issue, please see subscription information below.
US MARKETS
We are now 17 months into a credit crisis that continues to expose the corruption and incompetence of government, banking, Wall Street and transnational corporations. The situation has not stabilized and it won’t anytime soon. All we see are sweetheart deals for elitist corporations for which American taxpayers will pay for years to come. The future of our nation is totally out of control. For the last eight years our economy has been running on something for nothing, lies and deceit. The result will be hyperinflation and then the Second Great Depression.
As we predicted long ago the only avenue open to the elitists that control our country is to hyper-inflate to avoid collapse as long as possible. In this process financial institutions, most of whom are bankrupt, are trying with the help of the American taxpayer, to hold on. In that process they are severely limiting credit, which restricts business and growth and has caused crippling de-leveraging in our economy, particularly among hedge funds. Debt totally embraces our lives and finally we see de-leveraging among individuals as all debtors and borrowers come under pressured from the lenders. While this transpires relentlessly, unemployment grows stamping out the buying power of the masses many of whom already are on the edge of bankruptcy. We have this great mass of disintegration on the bottom and massive amounts of money and credit on the top. The money and credit is not reaching consumers who have been forced to stop buying. It is staying on the balance sheets of banks, brokerage houses, insurance companies and transnational conglomerates, such as G.E.
As you can tell from our publication and its growing size there is so much negative news we cannot publish it all. The response of government has been a massive distribution of taxpayer funds and if you can believe this they refuse to tell us who are the recipients of this public largess. In spite of repeated requests they refuse to name the borrowers, so that corruption and fraud can thrive. In such an environment of aggregate creation and corruption the only investments that shine are gold and silver. The cracks are appearing in this edifice of greed and the only place to flee to is those historical stand buys.
The first $125 billion lent by TARP went to banks in the Fed system of which 90% was used to award bonuses. This is to make sure that the Illuminists continue to receive the riches of the system. Funds are being lent, but the system is being strangled. Funds lie on bank balance sheets to keep them solvent and to be available for dividends and the purchase of other non-elitist banks. This is why more and more funds are needed for the system. This is what we realized very early on, some three months ago and that is how we were able to predict that more than $10 trillion would be needed to keep the system afloat. In time these infusions won’t work any more.
This is why the Fed and the Treasury won’t tell you who is receiving the handouts. It is a state secret. Such arrogance is unprecedented in the history of America.
Banks do not really know if they are solvent because they are holding so much toxic garbage. On top of that they have to contend with losses on credit cards, commercial mortgages, vehicle loans and derivatives.
As this game goes on unemployment is 6.7%, U6 13.5% and long-term joblessness is 15.4%. That means a further hit on bank earnings, balance sheets and solvency.
What has also gone almost totally unnoticed is the $700 billion drain from the economy via cash management bill. This holds down inflation and those funds end up in Treasuries that end up in elitist banks in exchange for toxic CODs, SIVs, and allows banks to handle their naked derivative problems. These tactics by the Fed and Treasury put more downward pressure on the economy causing more unemployment and less consumer spending. This deepens the recession. Saving AIG, as we predicted, will cost $500 billion and Citigroup $1 trillion. JP Morgan Chase has unlimited funds to cover its derivative losses, control the bond market and to depress gold prices. That is why what Morgan does is classified as a national security issue.
It has been just three weeks since the Fed flooded the books of the 16 major banks that run Libor, the London Interbank Offered Rate, which is used worldwide to calculate interest rates. That rate was 4.8% for 3-month paper. A couple of days ago it was 2.16%. This forced the lenders to loosen up on lending and bring interest rates down. This needless to say is highly inflationary. Among other reasons for the manipulation is that this rate is used to set mortgage rates worldwide. The funds used to accomplish this were lent by the Treasury to US banks, which in turn lent to London banks. That step was followed by the Treasury and the Fed, via Morgan, Goldman and Citi, to drive down rates on US Treasuries. The long term rate on the US Ten-year Treasury note was then driven down from 4% to 2.55%. 30-year fixed rate mortgages usually sell for 1% to 1-1/4% higher than the 10s, so rates should be 3.80%. The lenders, banks, held rates at 6% to 6.5%. After such an onslaught they have dropped rates to 5.5%. That isn’t good enough for the Fed and the Treasury, they want rates at 4.5% for FHA loans, so that is where that mortgage rate is headed. If you were waiting to reset your mortgage wait until rates go below 5%. That should happen soon. This shows you how extensive government and Fed manipulation is.
Vast amounts of funds are being funneled in the finance sector where half the corporations are bankrupt, without any questions or announcements as to who’s getting the funds. We are talking about over $10 trillion yet the UAW and the officials of GM, Ford and Chrysler have to beg on their knees for $15 billion to tide them over for 3 to 6 months. This shows you how unfair the entire process is and how the Illuminists are trying to bury the American and Canadian vehicle manufacturers as soon as possible. The Democrats see political advantage here and will get a bailout done. They should be carried for 6 months and that is it. We believe they will not make it. We see absolutely no recovery for years to come. In June they’ll all file for bankruptcy. What you are seeing is a sideshow. Our vehicle business will not survive unless Congress implements trade tariffs on goods and services. Remember whether companies live or die is decided by the Illuminists not by a free marketplace. Most of the money lent out is going to bankrupt loser banks and brokerage houses, which caused all these problems in the first place; Labor elitists have exacerbated the problem over the years as well. It is still not too late to drop labor rates from $31 to $15 an hour and make other major concessions as well, in the absence of trade tariffs in order to survive.
How would you like to have several billion dollars without any restrictions on how it’s spent? That is the kind of deal Citigroup, AIG, JP Morgan Chase and many other institutions have regarding money from the Treasury and the Fed. These are the Illuminist corporations that are deemed too big to fail. When they are to be bailed out Congress has very little to say, but when the big 3 automakers need help congress puts them through the hoops. This capitalism is survival of the fittest and the richest. There is no fairness or even handedness. It is the worst looting of the American people in history. Automakers must have a plan, but Citigroup doesn’t need one. As it was said in Animal Farm, “some are more equal than others.”
Bear Stearns was financially assassinated. Fannie Mae, Freddie Mac and AIG were rescued to cover up their frauds. The corrupt Lehman Brothers was simply beyond saving. It would most certainly have been saved if it had been possible. The only way Fannie and Freddie were saved was by guaranteeing their bonds. That job was left to the American taxpayer.
Such bailouts and free trade, globalization, offshoring and outsourcing have destroyed our economy. These actions began in full force under Clinton and Rubin, and were strongly carried on under the Bushes. The strong dollar-anti-gold policies in the 1990s laid the groundwork for the boom and bust of the dotcom era. It also allowed conglomerates to offshore production and workers, which destroyed our industrial base. These US transnationals control 60% of Chinese exports to the US. As a result the American consumer economy is now collapsing.
In June subprime and ALT-A resets should be mostly over, but the Option-ARMs-Pick-and-Pay loans are coming into view. The later are ten times larger than the former held by banks. A 10% write off would wipe out many American banks. Just recently ALT-A and Option ARMs delinquencies were averaging 20 plus percent for 2006 loans, and 17% plus for 2007, up from 16.9% and 12.2% six months ago. As this next nightmare unfolds over the next four years, it will be joined by the FHA bubble that will begin two years from now. This is more serious than the subprime/ALT-A fiasco could have dreamed of being. This will be a wipeout and all treasury’s Paulson and the Fed’s Bernanke can think of doing is to bail out Illuminist Wall Street and banking. They want to make sure shareholders get their dividends and corporate officers get their mega salaries and bonuses. Wait until the other loans go bust – the credit card and vehicle loans. As we explained previously the commercial real estate market is frozen because banks won’t lend and that crisis is unfolding as we speak. The people who destroyed our financial system are being allowed to repair it. The problem is they are not repairing it – they are looting it further. The fraud is blatant and Americans are too dumb to understand what is being done to them.
As a result of the Fed draining liquidity out of the system and giving it to the banks to keep them solvent via cash management bill sales, there is little left in the economy and the people to borrow. These actions should be looked at for what they are – a further bailout of the financial industry. This in part is a reason why credit default swaps on US Treasuries are at 50 bps not at 1 or 2 bps. This figure is rising because professionals think there is a growing possibility of the US government defaulting on its debt. This premium is double what it was just two months ago. In case it interests you, states such as California, Michigan, Nevada, Ohio and New Jersey vary from 192 bps to 164 bps. Can you see the great risk in buying or owning municipal bonds issued by these states? If you own them dump them. You cannot be blind to the facts - take action emotionlessly and sell them if you own them. Whatever, you do not buy them. This is why we stopped recommending US Treasuries a year ago and switched to Swiss franc Treasuries.
Investors are running headlong to liquidity, bypassing quality and safety. After they realize they’ve only solved part of the problem they will head for gold. The supply of US Treasuries grows exponentially every day. The dollar is strong and it shouldn’t be. The demand for physical gold cannot be filled so obviously some people realize what is going on. That is why Comex December futures’ physical delivery is at all-time highs. There are even rumors that the Bank of England has shipped gold to Comex to meet deliveries. In time we will all, but it makes sense.
Values in residential and commercial real estate continue to fall. Residential is off 17.4% and foreclosures are continuing at record rates. Millions of homes are in negative equity and are subject to walk-a-ways. This is the monstrosity the banks and brokerage houses created. First by issuing credit to people they knew could never pay and then securitizing mortgages as AAA’s that were BBB’s. Nothing but out and out criminal fraud. Government wants lenders to reduce loan balances to meet equity. They refuse to do so. Worse yet, most of the American public is broke. The only thing left for government to do is to nationalize all mortgages, which we predicted they would do 4-1/2 years ago. Get it straight your government is bankrupt. That will add $2 to $3 trillion on to the $10 plus trillion they are already under water for. Incidentally, Congress in which American voters returned 94% of incumbents to office, does exactly what the elitist bankers and Wall Street tells it to do.
Put this all together and you have massive inflation on the way. This means gold is bottoming out again over the next two weeks. When that’s completed you can expect a major upward move in gold and silver.
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THE INTERNATIONAL FORECASTER
WEDNESDAY, December 10, 2008 - 121008(3)_IF
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-- Posted Wednesday, 10 December 2008 | Digg This Article | Source: GoldSeek.com
