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

By: Bob Chapman, The International Forecaster

-- Posted Wednesday, 4 February 2009 | | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 31 page issue, please see subscription information below.



As hard as the new president and elitist team tries the stimulus package will fail. Just more Keynesianism, similar to what was attempted unsuccessfully in the 1930s.


After 1-1/2 years of massive financial injection the health of banks is getting worse. We see them needing $2 trillion and others see the figure at $4 trillion - money we do not have, that will have to be created and monetized. That doesn’t count the interest taxpayers will have to pay, some $1.5 trillion on $4 trillion.


The administration and others are in un-chartered waters. You won’t be told this, but this is an experiment. Protecting banks, mortgages and other loans against loss is not the province of government. This is not protecting the people. A bank for toxic assets is not the answer either. It just passes debt from lenders to the public. Why inject funds into bankrupt banks and other financial firms? Just allow them to go under and prosecute their officers. They all committed fraud. Taking ownership stake is next to useless if the entities are insolvent. This is not nationalization; it is consolidated privatization under the Fed. Furthermore, the issuance of stock as part of a loan package dilutes the equity of current shareholders, who then sell driving the price of the shares lower. That could cause a run of the banks.


Removing toxic assets from banks’ balance sheets is an exercise in futility. The lenders get off the hook and the public pays for the mistakes. If government pays marked-to-market price for toxic assets then all the other financial firms that haven’t received the same treatment as yet will have a large hole cut in their balance sheets, triggering losses and precipitating the collapse of companies throughout the banking system. There is no easy way around the problem. The only sensible thing is to allow these speculating financial firms to go under. They took the risks, lost, and we pay for it. As you can see if allowed to continue the bailout will take many other firms down the same path they would have embarked on anyway. It will just take a little longer and cost the taxpayer $20 to $30 trillion. Their game of 3-card-Monte is not going to work and Illuminist Obama’s team A knows that. The pricing of these toxic assets is at the heart of the matter. In fact they have to be dealt with directly. If that happens the system can be purged. Buying up the distressed assets just allows the movement of them from one balance sheet to another. It matters not what you call it – it is a Ponzi scheme.


If all this wasn’t enough, having bailed out the commercial paper market as well, the Fed is poised to launch an initiative soon to restart into highly rated commercial paper, ABS, asset backed securities, such as credit card debt, student loans and auto loans. Then they intend to expand their initiative to help free up loans for municipalities, small business, commercial real estate and other consumer debt. There is no end to the bailouts. It has become a nightmare. They are worse off now than when this began 19 months ago. What you are seeing has been deliberately done to bring you into the world of corporatist fascism and into World Government.


Yes, we certainly need banks and they need leverage, but not 40 to 1 leverage, 8 to 1 leverage. We need a central bank. The US Treasury not the Federal Reserve. Banks should effectively price the cost of money and use that mechanism to finance our economy. Banks should never have been lending to Wall Street and hedge fund speculators that were and are using enormous leverage. The Fed and the bankers allowed unfiltered, credit creation, which was very profitable while it lasted.  All of this financial wealth was concentrated among the wealthy and powerful – the elitists of our time. In its process a bubble was created, which has enveloped and is in the process of destroying our financial system.


Many want the Fed, the government and the taxpayers to bail out the system. If we do that we are playing their game and we accept defeat. We are told there is no real alternative, but that is not true. Government, the bankers and Wall Street have never done anything right. They have had the power to do so but have refused to do so. It is always, more profit and power for the rich and that never-ending desire for World Government. It was all planned that way. There has not been a free market in our capitalistic society for a long time. These hucksters should be criticized and exposed to the fullest for what they have done and are now doing. They won’t compromise and neither should we. There is nothing inevitable about government control of banking, finance and commerce. We have been sold out by all our leaders, but the game isn’t over yet. We’ll either stop these people or die trying. Putting it blandly, we are surrounded by whores. The madness of espousing invasive fiscal and monetary stimulus to ward off the horrible evils of deflation is an excuse to lay the groundwork for a greater depression and a greater collapse.


We say it is insane to target asset prices, rig all stocks, forex and commodity markets, to suppress prices in one area and increase them in another. It is insane to bailout banks, brokerage firms, insurance companies and select elitist transnational corporations. It is insane to borrow and print money and credit to support prices in the debt securitization marketplace. It is insane to try to bail out one quadrillion dollars worth of derivatives. There is no way you can reverse a black hole. $100 trillion won’t resuscitate the system.


Washington cannot run Washington, so they can’t run long-term investment or wealth creation. Economic stabilization should be pointed toward long-term jobs and that can only be attained with tariffs on goods and services. No more market manipulation and unreasonable leveraging.


The greedy and corrupt of every nation in history have always found justification whether it’s cold war or terrorism to peddle national security as a front. Everything bankers, Wall Street, corporate America and government do is for personal profit. It is always conflict of interests, and double standards. Only today it is worse in America than it has ever been. Politicians, diplomats, bureaucrats, military officers, and businessmen have been involved in falsification and manipulation of facts and records. There are the cynical, misguided and the profiteers and those bent on one-world government, all aided by extraordinary corruption. All the filth manages to be swept under the rug and this vermin lives on.


In facts and stores from another world William Lynn was appointed to be Deputy Defense Secretary. He was the Pentagon comptroller who somehow lost $2 trillion in defense contractor funds.


Mark Patterson is Chief of Staff for Timothy Geithner and was a high level Goldman Sachs lobbyist.


Why is the fraud by Bernie Madoff any different from other frauds on Wall Street by Goldman Sachs, Lehman, JP Morgan, Bear Stearns, Fannie Mae and Freddie Mac, Citigroup ad infinitum? With AIG, as we said in the last issue, half the government is involved.


The same government agencies such as the CFTC and the SEC are going to get more funding and power to better engage in corruption, arrange international market integration, asset controls, data collection and to put a worldwide stranglehold on your assets. They want to know what you own and where it is, so they can control everything you do financially.


The insolvency of the financial world has to be hidden as long as possible or until the Illuminists can start another major war. In the meantime the lemmings are flocking to US treasury and agencies in what they perceive as safety. The only safety is in gold and silver related assets. In stimulus little will reach the average household. The majority of funds will go to bailout the fraudsters in banking, insurance and Wall Street. This is no chicken in every pot.


Today’s zero interest rates punish savers and force people to speculate in such places as the stock market. The bulk of the stimulus is for further speculation. What else can you call bailing out companies in or on the edge of insolvency? We’ll let you in on a secret. Ten times more stimulus, $100 trillion, won’t fix our financial system. Can there be a recovery? Not a chance.


Layoffs and store and factory closings will go on indefinitely. Volume will fall in exchanges, as banks, brokerage houses, insurance companies and all matter of employers go out of business. The biggest companies are getting hit very hard exactly as we predicted.


Almost five years ago we forecast the failure of Fannie Mae and Freddie Mac, as well as the fall in real estate. We followed that with recommending bailing out of the market at 14,000 and getting out of commercial real estate.


The next bomb to hit will be the pension bomb. Both the stock market and bond markets are headed much lower; 50% lower. That is bad news for pensions and insurance companies, as well as anyone invested in those markets. The only thing left that is safe are gold and silver assets.


The implosion will probably begin in state, local and private pension plans. Good portions of their assets are illiquid, perhaps 15% to 20% and there is no telling how long they will remain that way.


Last year funds lost about 30%, the worst year on record. Cities such as Vallejo, California has filed for bankruptcy, and CALPERS lost 35%. San Diego is on the edge of disaster as well.


America’s 500 largest companies have a deficit of $200 billion in their pension plans. We would guess that if our prediction of a 4,000 Dow becomes a reality that the deficit would rise to $400 to $500 billion. Those with defined-benefit pensions may soon find themselves choosing between making payroll or pumping money into their pension plans. You know what the companies will do – stop contributing. As usual government will let them off the hook. They may cut benefits by 50% to 75%, so get ready for it. It’s when government decides to cut back on Social Security, Medicare, Medicaid, etc., that the real revolution will get underway. We predicted all this eight years ago and it will soon come to pass.


Only 19% of corporate workers have pension plans. The retirement system of 2,600 public pension funds, federal retirement accounts and union-based defined benefit plans and union pensions are worth $4.5 trillion. They cover 27 million people or 30% of the $15 trillion held in retirement accounts. Many of the pensions were heavily into socially responsive investing, which has proven to be an expensive experience. The most aggressive has been CALPERS, which lost 35% last year. Others were AIG, Citigroup and Bank of America, all of which are bankrupt. Social issues should play no part in investment decisions, especially when it is someone else’s money you are losing. It is not the intention of retirement pools to become political footballs. Over a 20-year period public pension plans earned rates of return substantially below those of other professionally managed funds. This is a result of political pressure and outright payoffs. CALPERS sold all their tobacco stocks and following that tobacco stocks rose 250% versus S&P and 500% versus Nasdaq. Financial stocks were just right for pension and profit sharing funds. We do not have to tell you what a disaster they’ve been. The geniuses at CALPERS had 25% of its $20 billion in real estate assets in the California market that is still a long way from the bottom with no buyers in sight. What happens when there is a shortfall in pension assets is that taxes are raised. The pension bomb is on the way. Within two years the worst will begin to be realized.



WEDNESDAY February 4, 2009

  020409 (1)_IF

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

An international financial, economic, political and social commentary.


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