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International Forecaster December 2011 (#3) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster



-- Posted Sunday, 11 December 2011 | | Disqus

The following are some snippets from the most recent issue of the International Forecaster. For the full 39 page issue, please see subscription information below.

 

US MARKETS

 

As we reach back into modern European history we see the unnatural amalgamation of 27-European countries, all of which are socially and culturally different. From our point of view the union was doomed from its inception. We lived for years in central Europe, spoke their languages and had a powerful outsider’s view of their cultures. Europe’s inhabitants generally were convinced that the union would prevent future wars and bring peace to Europe. Unfortunately, all they did was trade Perfidious Albion, Hitler and Mussolini for the Trilateral Commission, Bilderbergs and Goldman Sachs and JPMorgan Chase. The same gang that financed WWII from both sides. It is important to understand the real history of Europe, not that fed to us in universities, where almost solely the victors write the books. As you know there are two sides to everything.

 

There are not only 6 sovereign nations that are insolvent, but because of the interconnectivity created by the EU and the euro zone the financial misery has spread to otherwise solvent nations. They bought the debt of 6 sovereigns and it was proper that they do so. For France, as a result, they may face a double downgrade in their debt ratings.

 

We continue to hear that the ECB purchased all the bad debt of the banks and sovereigns to clear the decks, but under present treaty the ECB is specifically prohibited from doing so. That is why US Treasury Secretary Geithner is in Europe this week. He is to show Europe the error of its ways, change the treaties and model the ECB after the US Fed. The players won’t solve any long-term problems, but it will give Europe and the ECB the leverage to work its way through today’s problems, and as a result create some fierce inflation. The later to them is the less of two evils. The players are now all well aware that existing debt to be neutralized is at least $6 trillion and if austerity is not followed the numbers will be higher. The European economies are now falling into recession and austerity could take Europe into depression. Remember, tax revenues will fall and impair the debtors’ ability to service their debt. It now becomes clear looking at the facts that the US and Europe all have similar problems, they are all broke, along with the major banks and they know full well money and credit creation will not solve their long-term problems. The game is being moved in this direction, because there is no other direction it can be moved into.

 

That is why European and US leaders are attempting to change the treaties to accommodate the money and credit creation potential of the ECB.

 

The issuance of new Eurobonds being created to restore long-term solvency is a non-starter, as opposed to changing the rules for the ECB. Both concepts just throw debt into the future, some 50 or 100 years away.

 

The concept being pushed as hard as the ECB becoming the Fed of Europe is the coordination of economic policies by a committee of 8 bureaucrats and 17 Secretaries of the Treasuries from the euro zone countries. These individuals would make all budgetary and fiscal choices for all 17 countries. In such a process each country would give up its sovereignty to a small group of bureaucrats devoted to the formation of World Government.

 

The alternative is to abandon the euro and the euro zone, which we believe is the real answer. Write off the bad debt and get on with life. Germany could be headed in this direction. We will know as we publish this weekend if there will be a new direction. The solutions offered are really those of the US and UK. The question is will the Europeans accept them? We do not know, but we do know that Germany and the Bundesbank will not accept any blame, after all those years of sacrifice to make everyone happy. Those days are gone forever. On the other hand is Germany trying to readopt the Deutschemark? We will have a better view after the weekend. Keep in mind 65% of Germans want out of the euro, out of further debt guarantees and many want out of the EU.

 

The Germans are tired of paying the bill for the southern European lifestyle. What Germany is saying is if you want us to stay in the euro you have to live by the rules, otherwise you are out. Recall that the British, French and Americans forced the euro down Germany’s throat as a concession for German unification.

 

We again as well site the profound cultural differences within this unnatural union. Germans are very ethical and steadfastly uphold the law, which is why we see it as unusual when they advocate treaty changes. They are not interested in short-term treaty changes; they are generally only interested in long-term solutions.

 

It has been quite evident that Germany never wanted the euro. There have been those since Franz Joseph Strauss that have worked for amalgamation such as the EU and then the euro zone and world government. It is they, bankers, bureaucrats and politicians who have placed them in their current position, forced to follow Keynesian precepts and to accept an unwarranted euro. That has put Germany in a terrible position skipping around the law, which is what Hitler did and putting political, financial and economics ahead of the law. Germany never wanted the euro – they also knew that the potential for making a great deal of money was manifest in such an association. That is why they worked. The other was as Greece and Italy cooked their books. In the end the euro could not work. The public debt limit of 3% of GDP when violated was ignored and one interest rate for all turned out to be a disaster that we are now seeing the results of. Within the 17-euro zone countries we saw different stages of development and we see the same thing today. Obviously six countries cannot compete and more may follow. The gains go to six nations and the remainders sink further into debt. This was known and evident from the very beginning but the experiment went ahead anyway. Bankers, politicians and bureaucrats wanted world government and the six competitive nations wanted the profits. It only took about 10 years to destroy the infrastructure of the unfortunate losers. The sacrifice of the euro is on its way out – another failed experiment. The globalists want the euro but are well aware of its shortcomings. As a result they are in the process of salvaging the euro zone and eventually the EU by attempting to functionalize the ESM, European Stabilization Mechanism, in order to strip these nations of their sovereignty and in that process totally control 27 nations in what amounts to a slave unit. That unit being run by bankers, politicians and bureaucrats. This is what Hitler tried unsuccessfully to do 67 years ago.

 

Unfortunately, if the stronger solvent nations leave the euro, or vice versa, the governments, banks, insurance companies and pension plans could very well be wiped out by the bad debt. They would have to be reorganized, which really means being bailed out by each sovereign nation and the citizens of those nations would pay for this 10-year fiasco. At this juncture this eventually is the only way this can work out. Now you can better understand what a horrible mess this is, and once the euro zone tumbles it will take the UK, US and the rest of the world with it. We predicted this 12 years ago and it is now reality. What was not supposed to happen is reality. The easiest way to gain time is to have the Fed fund the ECB, as the treaty is written, allowing the ECB to act as the Fed has acted. That would allow the ECB to fund the losses into the future and put off the exit of the six insolvent nations. It would also allow the politicians and bankers to impose the end of sovereignty for the 17-euro zone members. This is what we believe they are shooting for. If the Fed can fund 80% of the US Treasury’s debt then so can the ECB. This incidentally is the US plan and approach. By the ECB backstopping the bonds for the six unsound nations, as they go through austerity other buyers would be reattached to the market. Keep in mind that about 1/3 of Greek debt has already been purchased by the ECB, IMF and EFSF, so they are part of the way there. Such an approach may be rejected; default may follow along with the breakup of the euro. This is complicated and not easily deciphered.

 

Many are looking for solutions from up on the German restrictiveness, but then again they are paying the majority of the bills. History tells us involuntary acceptance of profligate credit expansion and unpayable debt leads to total catastrophe for the entire financial system. All we see is accommodation that eventually will bring this about.

 

In the end it is all about money and power. Governments have continually broken their pact with their citizens by watering down the value of currency thereby depriving the people a safe storage place of wealth. Money, a social contract, has consistently been broken by politicians through history and that will never change, because politicians are what they are, of course with minor exceptions. This is why gold has been so valuable over the centuries. It holds its value versus all currencies. In Europe today you have a currency that just happens to be a medium of exchange. Its real function is to tie European nations to one another to form a world government with the euro eventually becoming a world currency.

 

The result for currencies over the past 20 years has been disastrous. During that period gold went from $252.00 to $1,923, while being manipulated and suppressed by governments and central banks. We ask what happens to these currencies when gold reaches its true inflationary level of $8,700 and higher? Will anyone really want to hold any currencies, except those guaranteed by a 25% gold backing? The elitists are finding they cannot control the euro and credit never mind a world currency. Monetary policy and the ability of Congress should be limited to what can be paid for with reasonable revenue profits with a 3% leeway for growth. All monetary policy has to be made by a country’s Treasury, not some private banking cartel.

 

The results of Friday’s meetings in Europe, not yet completed, are the following:

 

ECB appointee, President Mario Draghi has said the ECB will offer bankers as much money as they need for three years and loosened collateral rules for refinancing operations. The ECB will also cut bank’s reserve ratios to 1% from 2%. That is so banks can do more lending. Long-term nothing has been done to fix the problem, which is just as we expected they’d do. The result will be ever-greater inflation. 

 

EU banks must raise $152.8 billion in fresh capital. In Germany $17.5 billon, in Italy $20.6 billion and in Spain $35.1 billion. The only way that can be achieved is by the ECB or the Fed buying the bonds.

 

Of the banking group 8 failed stress tests in July with a capital shortfall of $33.5 billion. This means are large member of banks will have be reorganized, or bailed out by the taxpayers or liquidated. These numbers are underestimated and their needs should be double the announced. As you can see this is another putative. The combined funds for rescue that have to be produced by sovereigns will be $132 billion. As you remember they need $6 trillion minimum to keep the 6 unsound countries from failing. It is obvious that in 6 to 9 months all these countries will be back at the table doing all of this over again.

 

Virtually 50% of the problem has been dumped in the lap of the ECB. Planners like to forget that in 2012, $1.4 trillion of long and short-term debt come due and has to be refinanced. As you can see the only way all these funds can be acquired is by monetization by the ECB and the Fed. The problem hasn’t gone away, it is worse.

 

As we predicted some time ago prime money market funds would leave the European battlefield and so they have. The 8 largest US money market funds have cut holdings in French banks by $76.8 billion yoy, leaving current exposure at $5.56 billion. It is not surprising that the Fed has come to the rescue to produce that $71 billion to keep French banks from collapsing.

 

          When you thought there might be some kind of an agreement a rebellion by Finland, the Netherlands and Ireland changed everything. They said, as we pointed out, that the ESM was unconstitutional. They said it was an erosion of democracy and it would as we pointed out, end in endless funding without recourse.

 

          The EU so far has failed to secure backing for all 27 countries to change the EU Treaty, which would take perhaps two years to accomplish.

 

          Even Draghi, of the ECB, said lending money to the IMF to buy euro bonds was illegal, after he said it could be done yesterday.

 

We are told that there is an agreement for deeper fiscal integration in the euro zone. That is absurd. We had the same rules under Maastricht 3% and 60% and no one followed the rulers, or was fined. Now they want to push the numbers again. They are insane.

 

We could go on and tell you all the possibilities, but the conference was again a loser. This should really have the bankers going insane. Next to nothing was accomplished.

...

THE INTERNATIONAL FORECASTER

SATURDAY, DECEMBER 10, 2011

12/10/11 (3) IF

E-MAIL ADDRESSES

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info@intforecaster.com

For correspondence to Bob:

bob@intforecaster.com

CHECK OUT OUR WEBSITE

http://theinternationalforecaster.com/

RADIO APPEARANCES:

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http://theinternationalforecaster.com/Radio_Interviews


-- Posted Sunday, 11 December 2011 | Digg This Article | Source: GoldSeek.com

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