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International Forecaster January 2009 (#9) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

-- Posted Sunday, 1 February 2009 | | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 35 page issue, please see subscription information below.



The banking sector continues to deteriorate at a rapid pace and you’d think by talking to banks, insurance companies and Wall Street that nothing was wrong. We may have a new National Bank financed by $200 billion from TARP and $300 billion from the Fed, which would create those funds out of thin air in the furtherance of the Ponzi scheme. The government may take common stock rather than preferred stock, or they may take convertible bonds. It is now evident all the legacy money center banks are insolvent.


As you are aware we said the recession started 2 years ago. We were the only publication that did so. A year later we were joined by a few others. This past Wednesday we forecast the beginning of the depression, which will last at least eight years.


Now Merrill Lynch economist David Rosenberg says we are currently in a depression. We are happy to be in such company. He says depressions last from 3 to 7 years, an elongated deep recession. We still have $6 trillion in private sector debt that has to be eliminated. A credit contraction that began 3 to 6 months ago which has just begun. At least $1 trillion in excess capacity. Growing credit card delinquencies. A housing market that has several years to go before it hits bottom. A Fed that is creating out of thin air a truly colossal amount of money and credit to prevent deflation along with zero interest rates. Twenty percent of personal wealth has already been lost. Real U6 unemployment rate of 15%. No wage increases and shorter work weeks. Corporate balance sheets are still saddled with fair value accounting. Sooner or later reality will have to be faced in mark-to-market and that is when we will really find out how broke some of these companies really are. The trip to never-never land is about to end.


On another note, 64.5% of sovereign foreign reserves are in dollars and it won’t be long before the US devalues the dollar and defaults. All countries have fiat currencies so we see simultaneous world currency default. That is why you have to have gold and silver related assets. They are the only true money. In the 30s almost all currencies were backed by gold and sovereign nations didn’t fail. This time they will and half the nations of the world will experience revolution, including the US. The gangster banksters will be tried and sentenced and their wealth confiscated, that is if the mob doesn’t get to them first.


Money is the common denominator and the only money is gold and perhaps silver. Re-flation and rescue are destroying all currencies.; The losses in paper will be staggering and the world financial system will not re-establish itself until countries again have gold backed  currencies, irrespective of the one world dream – insanity of one world government and currency.


All the fiat money and credit being thrown into the system just won’t work and it will worsen the outcome. Whoever heard of something so stupid as a bad bank, dumping ground for impaired investments for an insolvent world. Such a bank is a holding tank for worthless paper that we’ll all get to pay for.


          The Federal Reserve left the benchmark interest rate as low as zero, said it’s prepared to purchase Treasury securities to resuscitate lending and warned inflation may recede too quickly.


          The Fed is ready to buy “longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement today in Washington. Any purchases before the FOMC’s next meeting in March would still need a vote to authorize the action.


          Massive deficits could force the post office to cut out one day of mail delivery per week, the postmaster general told Congress on Wednesday.


          Postmaster General John E. Potter asked lawmakers to lift the requirement that the agency deliver mail six days a week.


          Faced with dwindling mail volume and rising costs, the post office was $2.8 billion in the red last year and, “if current trends continue, we could experience a net loss of $6 billion or more this fiscal year,” Potter said in testimony for a Senate Homeland Security and Governmental Affairs subcommittee.


          Total mail volume was 202 billion items last year, more than 9 billion less than the year before, the largest single volume drop in history.


          And, despite annual rate increases, Potter said 2009 could be the first year since 1946 that the actual amount of money collected by the post office declines.


          Wagner said that up to 80% of the borrowers seeking an easing of their loan terms are doing so because of the loss of a job or income.


          More evidence of that trend can be found in the default rate on "prime" loans, those made to borrowers with good credit. Defaults on these loans rose 340% in the three months ended Sept. 30 over the same period in 2007, according to the latest data from the Mortgage Bankers Assn.


          California was last hit by massive foreclosures in the early 1990s, when the state was also struggling with an economic downturn and rising unemployment. At that time, there were about 10 foreclosures for every 100 layoffs, said John Burns, an Irvine real estate consultant.


          In this cycle, he said, there will be about 15 for every 100.


          "The price declines have been more severe this time, and the job losses are looking worse," Burns said. "Consumers are more likely to give the keys back to the bank because they don't have anywhere to turn."


          In California, the number of homes lost to foreclosure rose 180% last year compared with 2007, according to MDA DataQuick, a real estate data firm. It was the largest number of foreclosures since DataQuick began tracking them in 1988.


          Boeing Co. said it plans to cut 10,000 jobs, or more than 6 percent of its workforce, after a strike and program delays led to a fourth-quarter loss and a global recession began to erode demand for aircraft.


          The job reductions include 4,500 that were previously announced by Boeing, the second-largest maker of commercial planes and the No. 2 defense contractor. The new target was disclosed on a conference call after the Chicago-based company reported a net loss of $56 million after a year-earlier profit and said 2009 earnings will be lower than analysts predicted.


          Halliburton, a defense contractor and oil-service company once headed by former U.S. Vice President Dick Cheney, said it is willing pay a $559 million settlement to end to a bribery investigation under the Foreign Corrupt Practices Act. If the settlement is approved by the U.S. government, Halliburton will pay $382 million to the Justice Department and $177 million in "disgorgement" to the Securities and Exchange Commission.


          Ryland Group Inc, a U.S. homebuilder, posted a narrower net loss on Wednesday as inventory valuation adjustments and write-offs declined.


          Ryland reported its fourth-quarter net loss slimmed to $59.9 million, or $1.40 per share, from $201.9 million, or $4.80 per share, a year ago.


          Revenue fell 38.6 percent to $528.2 million.


          The Calabasas, California-based company reported pretax charges of $48.9 million for inventory and other adjustments, while a year earlier the write-offs totaled $242.7 million.


          AOL will cut about 700 jobs, or 10 percent of its workforce, as the Internet services and media company struggles with an advertising downturn and recession, according to an internal memo circulated to employees on Wednesday.


          Boeing Co. said it plans to cut 10,000 jobs, or about 6 percent of its workforce, after a strike, program delays and a global recession contributed to a fourth- quarter loss.


          The number of layoffs involving 50 or more workers jumped by one-third last year, and the pace of large job cuts appears to have quickened in the first month of 2009.


          The Labor Department reported Wednesday that 21,137 mass layoffs took place last year, up from 15,493 in 2007. That's the highest annual total since 2001, the last time the economy was in recession, and the second-highest since the department began tracking mass layoffs in 1995.  More than 2.1 million workers were fired as a result of last year's mass layoffs, the department said.


          The Scottsdale-based chain of El Paso Grill & Bar-B-Que restaurants has filed for Chapter 11 bankruptcy protection, citing the recession and "difficult economic environment."


          Starbucks Corp. continues to take the ax to its business. New plans include closing 300 stores and cutting up to 6,700 jobs in fiscal year 2009.


          Analogic Corp. of Peabody said it will reduce its worldwide workforce by 9 percent, or 140 jobs, including 128 in Massachusetts, as part of a plan to cut costs by $9.6 million per year. The 128 Massachusetts jobs represent 12 percent of the company's Massachusetts workforce, a company official wrote in an e-mail.


          The Federal Reserve on Wednesday inched closer to buying U.S. government bonds in a new front in its fight against the credit crisis and signaled unease over the risk of deflation with the economy weakening.


          The U.S. central bank, battling the worst recession since World War Two, held its main interest rate in a range from zero to 0.25 percent and said it could stay unusually low for some time.


          With no room to cut short-term rates, the Fed said it stood ready to buy long-term government debt if it felt it would help ease credit more broadly. Bond purchases could lower mortgage rates, helping to curb the housing downturn at the root of the global economy's ills.  Just be patient – monetization is on its way along with hyperinflation.


          The U.S. will inject $1 billion of new capital into corporate credit unions and back the lenders’ assets amid “unprecedented strains” from mounting losses in a bid to shore up public confidence, a federal regulator said.


          The National Credit Union Administration will guarantee uninsured lender assets through next month and set up a voluntary program through 2010, the agency said yesterday in a statement. The U.S. Central Corporate Federal Credit Union will get a $1 billion federal injection that will boost “the public’s confidence” in credit unions, the lender said.


          Government officials seeking to revamp the financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, the Wall Street Journal said, citing people familiar with the matter.  The paper said the Barack Obama administration could announce its plans within days but has not yet determined the final shape of its new proposal, and the exact details could change.


          Draft legislation that would change how over-the-counter derivatives are regulated might prohibit most trading in the $29 trillion credit-default swap market.


          House of Representatives Agriculture Committee Chairman Collin Peterson of Minnesota circulated an updated draft bill yesterday that would ban credit-default swap trading unless investors owned the underlying bonds. The document, distributed by e-mail by the committee staff in Washington, would also force U.S. trading in the $684 trillion over-the-counter derivatives market to be processed by a clearinghouse.


          “This would basically kill the single-name CDS market,” said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. “Given the small size of many issuers’ bonds outstanding, this would make it practically impossible for the CDS market to exist.”


          Sales of new U.S. homes plummeted to a record low in December, as a scarcity of mortgage credit dragged the sector into uncharted territory, the Commerce Department estimated Thursday.


          Sales fell 14.7% in December to a seasonally adjusted annual rate of 331,000 -- the lowest level since the series began in 1963. Sales were weaker than the 390,000 annualized pace expected by economists surveyed by MarketWatch. In addition, November sales figures were revised much lower.




SATURDAY January 31, 2009

  013109 (9)_IF

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

An international financial, economic, political and social commentary.


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