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International Forecaster February 2011 (#5) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

-- Posted Wednesday, 16 February 2011 | | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 27 page issue, please see subscription information below.


Rather than have designation to what the Fed is doing we believe to a great extent the term quantitative easing will fade from the major media and Fed announcements, probably to be replaced by a term such as accommodation. As time passes more and more professionals and investors will realize that this massive creation of money and credit is destroying the capital structure and the dollar. Other countries are emulating the Fed in various ways and degrees and that is why the USDX, the dollar index versus six major currencies has not plunged as it should have. It is lower, but it is not a true reflection of what is really in progress. Gold has spent the last 2-1/2 years directly competing with the dollar for supremacy as the world’s reserve currency and hands down the dollar has lost in an accelerating flight to quality to gold and silver. Over the past ten years versus nine other major currencies the dollar’s loss in value over each of those years has averaged 15-1/4% and versus silver 20-3/8%. If you widen the spectrum to 50 currencies, the currencies value versus gold and silver have had an even greater fall. The longer the Fed, and other central banks continue to work this charade, the worse the final outcome is going to be. Every step that has been taken since 2000 to extend the problems rather than solve the problems has been futile and makes the final deflationary depression more gruesome.


          The Fed has done a dreadful job, as has other central bankers and the public has become aware of that over the past few years. In the US polls they show 70% of the public wants the Fed replaced. This is significant because understanding what the Fed does is not easy for most people. We have been trying to expose the Fed Ponzi scheme for more than 50 years with only limited success. Then about 15 years ago along came talk radio and the Internet and they both opened the information spigot, allowing the average person to understand what the Fed was all about.


          During this learning process people are outraged at what the Fed have been doing for many years. The owners of the Fed are always in possession of inside information because they create such information, thus, in an ongoing basis they can never be losers. As a trader for 25 years we know you cannot have three months of trading without a daily loss and produce unbelievable profits without this information. These banks and brokerage houses simply cannot lose and you get to pay the bill one way or another. People now understand and that is one of the prime reasons Rep. Ron Paul just won 30% of a Republican-conservative straw pool. Romney in 2nd place pulled 24%, one of the main elements of Mr. Paul’s platform is to end the Fed, so that had to be a strong element in his victory.


          The elitists own the media and the Fed, so it seldom gets any bad press. They also own 95% of Congress and the court system. Taking down the Fed will also destroy the power of these elitists to control America and end the move by these people to create a corporatist fascist government. The Fed is on the way out. It is now only a question of when. Elitists are already planning an alternative, but they won’t be successful. Throughout America the Fed, bankers and Wall Street are held in contempt and by changing the name of the game is not going to fool anyone.


         The choices open to the Fed since June of 2003 have been limited. After that date there was no turning back. The die has been cast for a last all out policy of creating a world government. The Fed and others knew there would be no return. It was either victory or a disastrous defeat and exposure, which is something the cabal can ill afford. There is absolutely no way out of the trap they are in. They have extended the time line by expanding money and credit, swaps and quantitative easing. First, temporarily bailing out Wall Street and now they are doing the same for the US Treasury. They are being copied by the UK, Europe, China and many other countries worldwide, all of which are destined to meet the same ignoble end.


In essence the Fed has lost control because the only option it has is to create money and credit, which in the final analysis is self-defeating. The only way out is to classically purge the system, but if the Fed and the elitists do that, they are taking the problem to the very end, hoping for the best. This is not 1348 and the collapse of the Lombard System or the collapse of the Hanseatic League in the 1600s. Today there is the Internet and talk radio, which is projecting the truth worldwide. Why do you think we are seeing demonstrations, which we believe will spread worldwide including the US, UK, Europe and China and many other countries. The major changes have only just begun.


          Interest rates worldwide are creeping up in the real market. In the US despite efforts to suppress real interest rates the Fed is slowly loosing control. On the short end rates have doubled and using the 10-year T-note the yield has risen over five months from 2.20% to a high of 3.75%. That doesn’t in any way denote control and shows us that over time higher rates will unfold. That means the real estate problem can only worsen with lower prices and sales indefinitely. Worse yet, the inventory held by banks will grow and grow either taking them down or resulting in home nationalization. In the meantime worldwide price inflation, a result of QE1, envelops the globe. Wait until the affects of QE2 hit a year from now. Our question is when will QE3 begin? We will guess at early next year.


          We are headed toward 14% inflation this year, which is currently close to 7%. That means 2012 could send the economy into hyperinflation. As we said long ago the Fed will end up buying almost all of the Treasury and Agency bonds, which will create losses of well over $1 trillion, as rates rise. Monetization will be in full swing. The banking system is headed for renewed insolvency, as is the Fed. The effects of quantitative easing will unfortunately become manifest. Wall Street and Washington will continue to lie about it, but the Internet and talk radio will tell the public the truth. Again, your only hedge against the effects of these oncoming events to to own gold and silver related assets, such as shares and coins. All the clever deceptions are not going to work. The US, UK, European and other economies are going to come apart at the seams.


          For two years we have seen higher inflation manifest itself in smaller rolls of toilet paper, the contents of cereal packages falling by half and all-basic products rising 30% in cost. The public may be dumb, but they are not that stupid. They see what is going on. This is not going to stop. It is going to get much worse. Income and purchasing power will fall as inflation runs rampant. As a result consumption among the masses has to fall reducing GDP growth to a negative factor. Profit margins fall along with profits and many more businesses cease business. A continued fall in housing prices and a staggering inventory will send many lenders into financial oblivion. All that leverage is coming home to roost.


          The economists behind the scenes and Front man Bernanke are not dumb or clueless; they know exactly what they are doing. Their tactics and policies are designed only to prolong the system to keep it from total collapse. On one end we see the administration desiring higher taxes for the middle class and the wealthy on the other we see endless extended unemployment benefits and food stamps. These experts have put America into a death spiral from which there is no return, and they know that. The only question is when will they finally pull the plug and what will be the final outcome?


          This demoralizing economic and financial picture is accompanied by unbridled fraud, theft and criminality on Wall Street. Massive naked short selling that the SEC absolutely refuses to do anything about. Insider trading prosecutions, none of which touches the Illuminist inner sanctum. A CFTC that also refuses to stop and discipline the major firms, such as JPM, HSBC, GS and Citi for cornering the gold and silver markets. Flash trading, better known as front-running, proceeds apace with no interference from the SEC. We have a government that has killed free markets under the Executive Order called, “The President’s Working Group on Financial Markets.” Then we have black box manipulation used to take markets up and down as Wall Street pleases.


          The foregoing is not a happy story, but it is the reality of our times. It will eventually bring down our present financial system. When the end comes it will be violent and very damaging. Your only respite will be gold and silver related assets, something Americans are yet to discover.




02/16/11 (5) IF


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