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International Forecaster October 2010 (#2) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

-- Posted Wednesday, 6 October 2010 | | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 41 page issue, please see subscription information below.


Joblessness still dogs the economy, which needs 125,000 jobs monthly just to keep up with population growth. As we await September’s statistics we wonder if they’ll be as bad as August’s loss of 54,000 jobs? This unfortunate situation has been going on for more than three years; 22 million Americans do not have jobs and some 10,000 million additional are forced to work part-time, some 34 hours a week. Having real unemployment at 22-5/8% makes recovery very difficult. That figures is U-6 less the bogus birth/death ratio. It’s not surprising that credit card and mortgage debt go unpaid as default and foreclosure accelerate. These conditions are certainly a drag on sales. As those sales falter businesses lay off more workers, which exacerbates the problem.


In actuality today’s conditions are much worse already than in the 1930s, due to today’s social underpinnings, such as welfare, food stamps, government hiring and unemployment insurance. That said, spending by the administration and the Federal Reserve over and above the social safety net, has been almost totally lavished upon the financial sector and transnational conglomerates.


Those who call for another WPA do not understand the history of the 1930s. In 1939 unemployment was 17.2% and in 1940 it was 16.4%, down from a high of some 25%. That to us means after increasing government spending by 45% from 1935 to 1940 only marginal gains in employment were made by these policies and had not a war been created, who knows where unemployment would have been in 1942. All we hear are the same old tired nostrums of Keynesian fascist economics and they do not work.


There is little political will to change this because 95% of the House and Senate have been purchased by Wall Street, banking, insurance, Pharma and the transnational conglomerates. That is why little constructive is accomplished. The interest behind the scenes control just about everything and that is why almost all incumbents have to be defeated in November.


From a political viewpoint the Republicans would probably do the same thing the Democrats are doing, because the same interests pay them. Due to the system it is easy for Republicans to display indifference. The Democrats wanted the job so let them deal with it. Doing what is being done about unemployment certainly isn’t working. We can well understand why Democrats are jumping ship like so many rats.


The business community says little or nothing as they discharge millions of workers to improve earnings, so their stocks will rise and they can profit from their options and bonuses.


The suffering and pain of millions of discharged workers continues, as the safety net keeps them out of the streets. Wars and occupations continue, as deficits and debt climb and revenues fall.


There is little incentive for big business to create jobs. Regulations and legal roadblocks are becoming a major impediment to expansion and hiring. Investors won’t invest in a hostile environment. Capital gains are much lower in other countries and tax credits spur production and innovation. Everything simply costs more in America for a variety of reasons. Business wants subsidies like those being offered elsewhere. It is also called corporate welfare. Such as keeping $1.6 trillion offshore so taxes do not have to be paid in the US. This subsidy is to offset subsidies offered in other countries. Like in the manipulation of currencies for advantage, which has been going on for years without a peep from government, because the end result was the purchase of US Treasuries and Agencies and lower prices on imported goods to keep inflation down. The excises of business are endless. The answer to subsidies and currency manipulation is tariffs on goods and services. That will bring this beggar-they-neighbor policy to an end. Copying what other countries are doing isn’t the answer. We do not want to build bigger and better crime syndicates.


Business does have some legitimate complaints and among them is the cost of protection from lawsuits from the government concerning discrimination, safety and the environment. No country in the world has the outrageous regulations the US business community is subjected too.


The administration’s policies have done nothing to increase employment and to restore economic growth. In fact their policies are just an extension of the policies of the previous administration. After two stimulus packages over the last four years nothing has been learned. They simply do not work and are continued to be used because the bureaucrats and the Fed do not know what else they can do. Corporatist fascism reigns under both political parties, and that is why almost all incumbents have to be voted out of office in November. They are supposed to be working for the voters, not special interest groups. These crooks are destroying America as unemployment rises, living standards fall and the rich get richer.


This economic philosophy of socialism is tearing the heart out of America. Wages and purchasing power fall each and every day as government continually reports bogus economic statistics. Zero interest rates penalize savers forcing citizens to be more and more dependent on government. The very nature of the bailout of the past few years tells you the government and the Fed prefer saving financial institutions rather than the overall economy. These are the same institutions, which caused the problems in the fist place. Even in these difficult times funds are lavished on Wall Street as unemployment hovers at over 22%. The social safety net is not supposed to stretch for years, it is only supposed to be a temporary transitory solution. Who can expect business to increase investments under such circumstances?


Presently the stock and bond markets are up, but only via the manipulation of the Treasury and the Fed. That cannot go on indefinitely. It is not surprising at all that more and more investors are seeking the safety of gold and silver investments.


Under the present circumstances an end of the Bush tax cuts would he disastrous. Taxes should be lowered, not increased. Administration spending should be cut $300 billion, not increased. Yet, the administration is going to request a $650 billion increase in spending, so that our financial system and economy doesn’t collapse. As you can see, the powers that be are trapped and there is no way out except to create another war.


Over the next several years the new taxes within the healthcare bill, some 16 of them, will come into play. The congressmen and senators who voted for the bill should be thrown out of office next month. They never even attempted to read the bill. Healthcare reform was the socialization of medicine, but even more it was hidden tax legislation. These taxes along with new healthcare costs, will dissuade any business from expanding its workforce. Just like in the field of medicine, 25% of professionals said they would retire or move out of the country, the number in business is 20%. If that happens there is sure to be a dramatic increase in unemployment from more than 22% to 45%.


If not stopped, the rise in taxes and unemployment will rise relentlessly and exponentially. This is part of the redistributed program of socialism and the construction of a welfare state. Everyone is in a position where they cannot retire, because savings yield little or nothing, taxes and regulations are onerous, and businesses won’t and can’t expand creating jobs. As a result business and individuals are going to go into the black economy and that is why government is seeking data on all income and assets of its citizens, so it can back into what they are doing financially. Most Americans do not understand that more than 35% of individuals and businesses either under report income or don’t report it at all. We can assure you that percentage is growing in leaps and bounds and will continue to do so indefinitely. Small business and individuals have no voice in Washington, only the wealthy elitists do. The productive are being squeezed and if it does not stop America could end up in revolution. If that doesn’t happen Americans will pay onerous taxes as the Europeans do, yes, income and VAT taxes pay taxation of an average of 70%. Readers, that is where America is headed like it or not. These conditions and decisions are made behind the scenes and like good little paid off puppets your elected representatives make them into law without a thought about what their constituents want. American people and business are being destroyed right before your eyes. The host is being devoured by the parasites.


We live in a corporatist fascist world when the Treasury Secretary tells us losses from the TARP program are only going to be $50 billion that you get to pay for in bailing out bankrupt banking, Wall Street and transnational conglomerates. Of course, government never tells the truth. What we do know is that the losses will be more than $50 billion and these parties will live another day to gouge and steal from you again in the future. If you let them, they will eventually enslave you. They will also bring you the biggest depression in history.


On a somewhat different note we find no recovery in sight, and we believe as usual that the “experts” will again be proven wrong. Were it not for a 30% increase in auto production, related to the GM IPO, the numbers would have been much different. This does not bode well for the fourth quarter, because of lower orders and backlogs. Sales growth will be 0.7% to 0.9%. This could set the stage for a fair to poor fourth quarter, the action of which will make the first quarter dodgy at best.


The experts are looking for a 14% gain in S&P, down from 36% last year. This looks like deceleration to us. How many workers will have to be laid off to reach these goals? That would put GDP growth at 1-1/2% at best and some of that growth, perhaps ˝% to 1%, could well be a hangover from the stimulus package. Not very encouraging. As you can see, the Fed’s waiting to use QE2 is having its effects. It also shows you the economy cannot prevail without $2.5 trillion in stimulus. This stage is not positive for corporate profits.


Next year without radical stimulus there is no chance for 6% GDP growth, rather the result might be 1-1/2% down to ˝%. If stimulus is thrown in you might get lucky and see 3% again. With the stimulus you will also get 5-1/2% inflation, which in real terms will be 14% plus. How much more can corporate America cut expenses and labor? We do not know, but after three years of doing so it is not going to be easy.


Residential and commercial real estate is again headed lower. July was weak and it usually is one of the best months of the year. Medium home prices fell in August 0.6%, off for four of the past five months and at a 7-month low. No one really knows what inventory figures really are due to a lender shadow inventory. Officially it is 11.6-months, four months is normal, and it could easily be 18 months, if not more. During the coming year home prices will fall another 10 to 20 percent. Those numbers will be exacerbated by subprime and ALT-A loans recently written by agencies to keep housing afloat.


Readers had better pray that many incumbents are defeated in November, because if they are not, the economy will head straight down hill. America cannot stand another two years of dreadful government. The Republicans had best take the House and perhaps the Senate. The shift should be to the conservative side, which will produce a lame duck presidency, and efforts to reverse the monstrosity we’ve seen over the past two years.


One of the phenomenon’s of the bond market is that the shift out of stocks over the past year has been almost totally into short-term bills yielding less than 1%. Official inflation is 1.6% and our figure is 7%. What can investors be thinking of? Even mutual funds are about 25% in bonds. Of course, this is unusual, especially with a falling dollar. When will the bond bubble break, and when will interest rates rise? We do not know but we do not want to be there. We want to be where it is safe. Where gains have been almost 20% a year for nine years in a row.


That brings us to gold, which is climbing a bull market wall of worry. Almost the entire media and most economists, analysts and newsletter writers are negative on gold. They have been that way for a long time and, of course, very wrong. That has cost their readers billions of dollars in lost opportunities. As we write gold is $1,339 with no top in sight. That is in spite of massive naked short selling, of some 45 to 1, on the LBMA, the Comex and in the shares. There is no question that major losses are being taken by the commercials and the shorts and the US government, which has been ramrodding the scam for the last many years. We do not want to forget silver trading at $22.72 in a complete technical breakout. It doesn’t get any better than this for the long side. We, in spite of enormous success, are plagued by bubblist who daily predicts the collapse of gold and silver. Louise Yamada, probably the world’s best technician says gold won’t be in a bubble until it reaches $5,200 an ounce. At current rates of inflation, real inflation puts gold at plus $7,700 an ounce. We do not know where that puts silver, but we do know it will be at much higher prices. Wall Street and the establishment do not get it. They are losing the battle for our minds and souls because of talk radio and the Internet. Contrary to their beliefs we are going to win this battle for our freedom, not only in America, but worldwide. The battle has been engaged and the enemy is fighting rear-guard actions. There will come a time when they can escape and everyone will realize the truth.




100610(2) IF


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