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International Forecaster March 2011 (#2) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

-- Posted Wednesday, 9 March 2011 | | Source:

The following are some snippets from the most recent issue of the International Forecaster.  For the full 33 page issue, please see subscription information below.


Yes, just as we pointed out after the Tunisian episode, this was the beginning of CIA, MI6 and Mossad planned activities in the Middle East. As usual there were several objectives. The first was a distraction to cover up the financial troubles in the US, UK and Europe. The second was to remove Mubarak from his dictatorial position, because of his refusal to participate and agree to an invasion of Iran and to cause chaos in the region, so that those who were pro-Iran would not give it assistance in the event of war. There was also the matter of controlling Libya’s oil and toppling its dictator Gadhaffi. The US and the Brits want Libya’s oil among other things.


The result of this western intervention has been and will continue to be a collective general collapse of current regimes. The replacement will supposedly be populist governments, when in fact that will not be the case. From behind the scenes will emerge leadership tied to the CIA, MI6 and the Mossad. These new governments will look like they are anti-west and anti-capitalist, but that will not be the case. Their overthrows have been in the works for years and all the new players are in place. Unrest will probably continue over several months perhaps for a year. A solution will be found for Libya and the west hopes their puppet regime in Saudi Arabia stays in place.


Nigeria has its own problems and seems calm except for the ongoing civil war between Christians and Muslims. That has been progress for 50 years between the Ibo and the Hunza tribes. The Christians have learned to live with the majority Muslim government.


Iraq has its own set of problems politically, but the country is still guarded by 50,000 or more US troops, as western oil interests pump their oil as fast as possible.


We believe any major disruption in Saudi Arabia would not only be met by local troops, but by US forces as well. Saudi pumps more than 8 million barrels of oil a day and the west cannot stand such a disruption. The region produces almost 17 million barrels a day, or almost 23% of total world production or 56% of OPEC production. Political upheaval should not last more than 3 to 6 months. The result will be turmoil for some time to come; a social and political situation that neutralizes any opposition to the regional aims of the US and Israel. It won’t take long for Mr. Gaddafi to be deposed and sent on his way and it could be with the help of US troops. Western oil interests would like that very much.


Many experts believe the surviving regimes will be anti-west and anti-capitalist, but we think that will not be necessarily so. These countries will want to pump oil and pump it as fast as possible, because generally speaking they have no other source of income. There will be lost oil production, but if Saudi Arabia is not involved in upheaval they can make up most of the lost production. Presently the only obvious problem is with Libya. The Saudi’s have said they will make up the lost Libyan production knowing full well they will have to pump three times Libyan production due to high sulphur content in Saudi production. Overall it can be expected that regional production overall will fall perhaps as much as 30% to 50% under new governments. That is only a guess. We won’t know the result for some time to come and such developments will prompt other non-regional producers to increase production and that includes the US as well. One might say the key is Saudi Arabia. If its government were overthrown then the world would be in serious trouble. From a practical viewpoint looking at world production 10% to 12% could be lost, but it could be augmented elsewhere, perhaps over a few years.


During such a period oil demand could slow by partial elimination of growth and less consumption due to higher pries and slowing economies. Overall that could bring about a reduction in consumption of about 5%. That would only make up 50% of the shortfall. Such a calamity could take oil prices to $200 a barrel or more and gasoline prices could rise 150% that is from $6.00 to $9.00 a gallon. Such higher prices would cause major changes in society. In places where petrol products are subsidized there would be great shock. Mind you these assumptions include Saudi Arabia being sacrosanct. If Saudi falls the result would be a nightmare.


All in all the average American would see petroleum based costs increase $2,500 a year, which would reek havoc on consumption and GDP growth. This kind of factor is what deflationary depressions are made of. $300 oil would increase the balance of payments deficit by $800 billion annually and erase 4% of GDP. Inflation would rage, especially when assisted by higher food prices. Wall Street doesn’t as yet understand this, but when it does the stock market will certainly fall. If you pencil in the increase in monetary aggregates by the Fed and the rising fiscal deficit you end up with hyperinflation and stagnation simultaneously. We could be looking at budget deficits of $2.5 trillion annually and a balance of payments deficit of $800 billion. This means 14% inflation this year and perhaps 30% in 2012. These events would produce a dollar collapse. It would also collapse the economies, China and India, their currencies, and many others as well in non-oil producing countries.


The financial situation will be catastrophic. America and many other nations would look like the Weimar Republic in Germany in 1923. This is a real terminal trouble that we are headed for.


At this juncture this is where we separate from the economic and financial pack that really do not understand history and what is really going on. The powers behind the scenes long ago decided that it was time to bring about conditions that would lead to the implementation of world government. Just go back into the history of the last 1,000 years. These people have tried this over and over again, so to us this is no surprise. 99% of writers, economists and analysts do not understand as yet and most will never understand. Even if they do they are afraid to write about it, thus, the world suffers as result.  The Pollyannaish attitude of professionals who should know better shows you how removed from reality they really are. The facts stare them in the face and they do not have the guts to properly interpret them.


As oil and gasoline prices head for the moon the White House tells us that the illegal alien who calls himself president, is considering tapping into the strategic oil reserve to ease soaring oil prices. All that will do is delay the inevitable, like the use of price controls. The second reason and a powerful one is to generate cash flow to relieve pressure on the Fed, which has been buying 80% of Treasury and Agency securities. What would be done would be a drop in the bucket and when replacement time comes government probably will have to pay much higher prices for oil to refill the reserves.


There is no question that higher petroleum and food prices will kill any chance of economic recovery. Perhaps this situation has been created to cast blame on the Middle East - N. African situation to cover for a recovery, which had not become reality. This past Friday oil closed up $3.07 at $104.97, the highest level in 18 months, as fighting increased in Libya. There is considerable spare capacity and pumped reserves worldwide, but by the time nations, if they will, get into action prices could be considerably higher. The impact of these higher oil and food prices will change the mode of living in the first world and starve millions in the third world helping the elitists rid their world of useless eaters. If China stops adding to their reserves and the Saudis’ increase production, both would help the situation, but will China stop? As we write citizens in Saudi Arabia are demonstrating in the streets. Where will that lead? If Saudi falls to the people you can expect $300 oil, and that would even be more disastrous. In such a scenario the world would be engulfed in massive inflation and gold, silver and commodities would head straight higher. Even if Saudi stays the same and China cuts back the best that can happen is a reduction in prices of 10% to 15% and that is simply not enough. The bottom line is these actions are an exercise in futility. No easy way out. Incidentally, this did not have to happen; it was planned by the elitists that way.


It should be kept in mind that inflation was on its way long before this recent incident. Last year we predicted 14% real inflation in the US in 2011. We are currently somewhere between 7% and 9% and those numbers are about to escalate quickly. Remember, normally prices rise as a result of the Fed increasing the supply of money and credit, which translates in a general increase in the price to $850 billion in fiscal spending in QE1 and stimulus 1. We do not know the numbers on QE2 as yet, but we believe they are in the same area, along with stimulus 2 of $862 billion. The total has to be thus far between $900 billion and $1.7 trillion by the Fed. That is probably $5 trillion and there has been no recovery. We predicted this would happen and it has. If you remember last May we predicted QE2 and stimulus 2 before anyone else, and QE3 plus stimulus as well, and that is on the way along with higher unemployment, stagnant wages and hyperinflation, which will hit in 2012 or 2013. Central bank policies are not going to change, they cannot. It is the only thing left for them to do and as we said almost 12 years ago, it won’t work. Inflation causes speculation – a field generally left to professionals and a condition that does not create jobs or increase production. All it does is turn the economy into a vehicle that looks like a casino. This occurrence forces those on fixed incomes and the poor into poverty, while Wall Street and banking amass even more false wealth. This all causes a misallocation of resources and malinvestment, which is why such actions do not work. The system has to purge malinvestment and allow those who have used unsound practices to go bankrupt. It will all happen in time, but in the meantime the only guaranteed safe haven is gold and silver shares, coins and bullion. Only then can you protect your assets as 85% of the populace goes broke, just like in the 1930s and 1870s. These actions by the Fed and central banks only undermine the production of real wealth. It kills purchasing power. Money, paper money, loses its value and it leads us to hyperinflation, which is the loss of faith in the currency. Prices rise in the midst of inflation, but not because people want more for their labor or commodities, but because people are trying to get out of their currency. That is why as soon as they get paid they buy food and the necessities of life, before their currency is worth less in buying power. Why do you think FEMA just ordered $1 billion in dehydrated food? They are going to cost much more later. One major manufacturer will spend two years filling that order and will not be selling to the public over that period. The cutoff of the consumer market should send you to buy immediately before there is none left to buy. While these pressures increase Wall Street and banking go on their merry way committing their crimes and no one goes to jail, something we’ve been saying for more than 20 years, and something other writers are just discovering.


The game being played by government and the Fed of producing and propagandizing bogus CPI and unemployment numbers is becoming more widely known and in time few will believe anything produced by government. Stable prices translate into little or no inflation. We are far from that and it is getting worse. We are seeing the result of 11 years of monetary profligacy, the past three years being the worst.


It takes anywhere from six moths to three years for excessive money and credit to filter through the system dependent on the mode of delivery. Just watch by the end of the year government will admit to 45.5% inflation when in reality it will be 14%. This is what they did the last time around. We mention inflation because it is all part of the plan to bring the US, UK and Europe to its knees economically and financially in order to force citizens to accept world government. QE1 and 2 and stimulus 1 and 2 are hitting the monetary and financial system and there is no way they can be reversed. You now add such monetary and fiscal policy to the changes in the Middle East and N. Africa and you have major problems that only gold and silver related assets can save you from.


As the problems in N. Africa and the Middle East continue and civil war rages in Libya, we are being besieged with justification for a QE3 just as we suspect we would be. The National Association of Business Economics says continued Fed purchases of Treasuries will be needed if oil prices continue to climb. They believe $150 oil would present such a problem and solution.


The SPR, The Strategic Petroleum Reserve, has 726.7 million barrels of oil or a 34-day reserve at the US daily consumption of 21 m/b. If looked at another way it could last 58 days. A big question is would Asia, particularly China, stop temporarily buying for their strategic reserves? There certainly would have to be an agreement to make reduction work. The US Energy Secretary says Saudi Arabia will increase oil production to push prices lower. China holds 39 days of consumption in its reserves. There is absolutely no guarantee that China and others will stop filling reserves. Recently the Philippines said it would require oil companies to have 15 days of supply on hand. This aspect of the crisis is still up in the air. The stage widens and the problem becomes more complex. We are now looking at long-term changes that will change the way we live.




03/09/11 (3) IF


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