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International Forecaster January 2009 (#1) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster



-- Posted Sunday, 4 January 2009 | | Source: GoldSeek.com

The following are some snippets from the most recent issue of the International Forecaster.  For the full 22 page issue, please see subscription information below.

 

US MARKETS

...

A re-inflation is on its way.  You can just see it coming.  Nuts of taxpayer largesse are being stuffed into baggy little banker cheeks via TARP, to be hoarded until the Fed gives the word.  An explosive Fed balance sheet, rampant monetization of treasuries, bailouts galore and exchanges of treasuries for toxic waste are offsetting whatever deflationary impacts are affecting the money supply on account of falling asset prices, CDS losses and de-leveraging, to the tune of over $9 trillion dollars.  The overall money supply, known as M3, is once again exploding.  Treasuries are being sold like hot-cakes to morons seeking a zero return and a perceived safe-haven, with failures to deliver growing ever higher because people are loathe to give up the treasuries they already own for fear they will never get them back, meaning that there is plenty of money on the sidelines waiting to be deployed.  Note that the orchestrated takedown of commodities and stocks were red herrings to scare people into thinking that deflationary forces were taking over.  These red herrings were orchestrated to justify the Fed's zero interest rate policy, which has created mega-spreads for killer profits among the anointed.  Some prices are falling, yes, but the money supply is not contracting, which is the true measure of deflation.

 

          Then there is the new stimulus plan, which will pump in close to a trillion dollars into the economy, mainly via new infrastructure and maintenance of existing infrastructure, but with many other state expenditures that are intended to create employment, to fund welfare and unemployment entitlements and to generally make up for lost revenues which states are now suffering due to plunging tax revenues and a frozen municipal bond market.  This stimulus package must be immediately funded, and that means a good portion of the funds will be from monetized treasuries.  The stimulus plan is undoubtedly part of the package to re-inflate the US and state economies.


          Also, the yen has been unnaturally strong against the dollar due to Illuminist manipulations that were aimed at precious metals and commodities, even while the dollar was rallying, and relief will soon be on the way for the carry traders who got reamed by margin calls, de-leveraging and redemptions during the stock market meltdown as the yen moved from 106 yen per dollar to 90 yen per dollar, and from 154 yen per euro to 121 yen per euro, over the past three months.  On Friday, the yen was weakened by one and one half yen per dollar, which sent the Dow up 258 points, just as an example.  You can bet that the yen will also be used to power up the re-inflation of our economy.

 

          The question now is, how low will they take the stock markets to glom insider trading profits on shorts executed via unregulated dark pools of liquidity, Project Turquoise and Baikal, and via the unregulated OTC derivative markets, before they decide to re-inflate?

 

          After the implementation of the stimulus package gets underway, the Fed will give the word, and banks will start lending out their hoards of cash through the highly leveraged fractional reserve banking system, where interbank loans are now guaranteed by the FDIC (and therefore by you, the taxpayer, who funds the FDIC). Simultaneously, the yen will wimp out via Japanese banker collusion, re-powering the carry trade, thus driving the stock markets up for one final monster rally to complete the Big Sting Two.  This means that Hanky-Panky, Bernanke & Co. no longer have a bazooka.  Instead, they now have a rocket launcher, wired, with the next round in the firing chamber waiting for ignition, ready to re-inflate the economy for one last round of fun and profits.  This last round of fun and profits will continue until hyperinflation extends the recession and causes double digit interest rate in order to properly compensate for risk and inflationary losses, at which point everything will lock up, IRS's will implode, and the world will fall into the one of the worst depressions of all time.


          We also warn you that when the banks start lending again, Main Street borrowers will see precious little of the new loan money.  Banks will lend to one another, via FDIC insured interbank loans, and make profits via insider-trading, speculation and arbitrage profits from monster spreads that were made possible by the Fed's zero interest scam, which the Fed justified via its deflationary red herring scam. Defaulted loans will not be helped to any significant degree.  Low rates will be used to power refinances and purchases so that new fees, commissions and spreads can be earned.  They have no interest in reviving dead loans, which do not yield fresh profits, and in any case, the losses from such loans remain hidden from view by use of regulator-approved "creative accounting," which is a euphemism for lying through your teeth while ignoring Sarbanes-Oxley rules.  Their banks and financial institutions are insolvent, and they intend to keep them that way.  They don't care about saving their derivatives.  They are beyond saving.  That is why Hanky Panky made equity injections instead of making toxic waste purchases with the TARP funds.  The Illuminati will milk your taxpayer largesse as long as they can to pay themselves, and then their failed financial institutions will be nationalized and melded into our corporatist, fascist police state.  During this process of nationalization, the Fed is going to go under with all its major member banks, which will all be amalgamated into a super-entity that will have a virtual monopoly on banking and regulatory power. Unless, of course, you, the American sheople, stop them from doing this.

 

          When this re-inflation goes into full bloom this year, those who do not own gold, silver and their related assets will be annihilated, vaporized and impoverished.  They will also shoot themselves for missing out on the profits that will be generated by the next leg of the greatest bull market in precious metals of all time.  This could well be the year you have all been waiting for.  The dollar is toast.  It will dead-cat bounce all the way down to 71, and then drop off the face of a cliff.  Oil has been hammered down far enough where very little "euro effect" can be squeezed out of it anymore, leaving only settlement of CDS losses in the private, unregulated OTC market as the dollar's chief source of support.  Note that dollar support via USDX futures collapsed at about the time the Fed announced its zero interest rate policy.  Open interest on the USDX dropped from 40,085 contracts of open interest to 16,566 contracts on December 16, 2008.  In addition, treasuries now yield a diminutive return at all maturities.  Who in their right mind would want these ready-to-be-vaporized assets when they could own precious metals?  We are stupefied by the continual clamoring for treasuries.  Even professionals just don't seem to get it.  But they will soon.  Just be patient.

 

          Note that the days when there was backwardization of gold precisely correspond to the days where there was large physical delivery volume on the COMEX.  Once a large delivery is made, traders fear that a trend is being set, and that the cupboard may soon be bare.  This makes one bar of gold in the hand worth two in the bush, and fully explains why spot gold sold higher than the current contract for paper gold.   

 

The world is headed into deep deflation as assets fall in value worldwide with the US and Europe leading the pack. Events are being shaped by central banks and governments to prolong the process until everything is in place to bring about world government. The degenerative process is going to be a dynamic systemic change that very few people expect. There is no historical precedent for what we see ahead.

 

 A current manifestation is the ongoing collapse of the real estate market, both residential and commercial. Prices continue to move relentlessly downward as government and the Fed attempt to arrest that process. It began with the takeover of Fannie Mae and Freddie Mac and the use of FHA to halt the downward process. Knowing these moves alone will not solve the problem; government is now letting mortgage holders stay in their homes after foreclosure just to keep them occupied until they are sold. We predicted all of these responses some five years ago. The next step by government will be to pay banks to inventory property until it can be sold and in that process the public takes the losses. The government will have some new soothing name for the entire process to make it more acceptable for the public.

 

The mainline media speaks in hushed tones as it reports day after day of bad news. The orders, from the elitists above, are “make it sound good or you will be looking for another job.” The corruption and lies continue, but there are no solutions. The word merchants do not know what to do. They are forbidden to tell the truth. In the business news we only occasionally hear a slip of the tongue as to what is really going on. That is US government manipulation of all markets, 24/7. In particular gold and silver and the commodity markets. This abject corruption has destroyed our markets. Those who recognize what is going on have fled to safety of one form or another. Many have migrated to the cash, gold and silver markets or to gold and silver shares. When hyperinflation hits, in the second quarter, and people start to realize probably in March that something really bad is afoot, then more people will start listening and getting involved. They are going to realize that we are in a depression worse than the 1930’s “Great Depression.”

 

During this hyperinflationary period your only refuge is gold and silver assets. If you are already in buy more. If you haven’t bought buy now before the next run begins. Go all in.

...

GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS

 

The average gold industry cash costs are about $440.00 an ounce up 24% from a year ago.

 

Canadian companies saw costs rise the most, up 56% from $271 an ounce to $423.

 

As gold roared to $1,033 an ounce, euphoria soon faded as central banks drove the price back into the low $700’s. On a year-on-year basis gold was up 21% but gold shares fell some 32% at the end of the third quarter according to the FTSE All Gold Mines Index. Shorting by official sources and de-leveraging played a crucial part in the uncalled for correction. The simultaneous flight from risk was particularly hard on juniors and exploration companies. Their share prices have fallen dramatically and a number of juniors are trading at values less than the cash/share they hold. The inability to get financing for junior and exploration companies will, if it persists, cause some companies to fail. That would set back production for years, which would curtail gold production from reaching the market, and in turn would drive gold prices higher. The producing gold and silver mines would be the winners and many promising junior and exploration companies would be absorbed by producers with financial access.

 

Some terrible market losses occurred over the past year and in order to offset them institutional investors sold their best performing stocks, which were the gold and silver shares. There, of course, as well was the liquidity factor caused by banks cutting back lending to hedge funds, which in turn sold anything and everything to stay liquid for pending liquidations, which set records. We believe 70% of that kind of selling has been completed. The result was a general sell off in all kinds of securities worldwide.

 

The gold market fell to $740; that was a fifth test of levels, between $680 and $750. We would have liked to see that final test at $720 or $700, but gold was ready to move higher. Just after this we gave an all out buy signal. This upward turn in prices ended the most serious challenges to the gold bull market since June of 2000. The bull market in gold has resumed. Let this be a lesson to long-term investors. You do not panic when prices fall in a bull market; you buy on extreme weakness. At this writing gold is trading near $870 on its way to again test $930 and $950.

 

Most of the selling is over. Interest rates are at zero and the G20 countries are increasing money and credit at exponential rates. It is important to remember that this massive increase of monetary aggregates and zero interest rates is a worldwide phenomenon. The upward pressure on inflation will be enormous. It will be far, far greater for a time than the deflationary drag. For a time, two or three years, the result will be an easing in economic weakness. That should begin in March or April, and carry forward for two years or more. Commodities, which have been battered, are probably close to a bottom as a result. Turmoil will continue in finance and economics and that will be very positive for gold and silver. There will be a move into gold as a safe haven and a new wave of speculation and investment will begin.

 

During the second half of 2008 the availability of gold scrap failed to grow and production fell tightening the market even further. The only real sellers have been central banks that have to be running short of gold to sell. Gold open interest is still off 50%, which means 300,000 contracts could be added to the long side by speculators and others.

...

THE INTERNATIONAL FORECASTER

SATURDAY, January 3, 2009  -  010309 (1)_IF

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

 

Published and Edited by: Bob Chapman

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international_forecaster@yahoo.com

if_distctr@yahoo.com

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-- Posted Sunday, 4 January 2009 | Digg This Article | Source: GoldSeek.com



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