-- Posted Sunday, 8 January 2012 | | Disqus
The following are some snippets from the most recent issue of the International Forecaster. For the full 30 page issue, please see subscription information below.
US MARKETS
The campaign for Republican Presidential nomination is far from over. We saw steady campaigns by Ron Paul and Mitt Romney, who received 24% and 21% respectively. What we are yet to fathom as to how Rick can come from 3% in the polls to nearly tie as winner at 24% by 8 votes. We changed channels and found Mr. Romney won by 8 votes. Neither is important. What is important is that Mr. Santorum will have to explain his miraculous recovery. We now have three men who could easily become the nominee. Mr. Santorum did exceedingly well and Ron Paul proved he is in the fight to the end and is being recognized as presidential timber.
There is more information regarding the Iowa election by others within the publication.
Irrespective of the trillions of dollars thrown at the US economy since 2006 there is no evidence that long-term solvency or recovery has been achieved. The debt that has been added and created means we’ll see higher inflation and perhaps hyperinflation. Comments by administration officials last week that if necessary the dollar will be crushed, are hardly comforting. Remember, just a week before Fed Chairman Bernanke said to Congressmen that the Fed was not going to lend Europe money to bail their members out and one week later we have a $1 trillion swap, loan program to bail Europe out. There is no effort at all to prevent eventual insolvency; as a matter of fact we believe that if Europe’s problems were not on the front burner the dollar would be selling at lower levels, a reflection of solvency issues. We should know better by the month of May how Europe stands, and if their situation is even short-term positive you can expect the dollar to head lower, not only versus the USDX but versus gold and silver as well.
Yes, the US economy will hold its own this year with more lending by banks to small and medium companies, which creates 70% of jobs. This effort rose 10% in the last five months of the year. The Fed is buying toxic mortgage bonds from banks to give them liquidity to purchase Treasuries, Agencies and to speculate in the markets. We do not know what leverage the banks are using, 7 to 1 or 32 to 1 - we will find that out later because they won’t tell us now. Then the economy will get the slosh over from the $1 trillion plus being created and used to keep Europe afloat. That means US GDP could range from plus 1-1/2% to 2-1/2% in 2012. The street saw slight growth, but the newsletter writers have been caught flatfooted. This kind of Fed manufactured growth comes in part from money and credit creation and that does little to help long-term debt problems. The Fed’s only concern is to keep the financial system safe and functioning, particularly in the US, UK and Europe. Extend and extend until you cannot extend anymore. These Wall Street and fed types that run around telling the world inflation is easing are just plain liars. We predicted last year that unemployment would stay about the same, and it did due to governmental layoffs at the state, county and city levels. And the federal government hired to offset that. Having made cuts now these entities are selling municipal bonds to cover the rest of their shortfalls. They still refuse to cut sufficiently to balance budgets and offset ongoing major losses. We expect many states and municipalities to continue this mode of operation, which will eventually bury them.
We have just seen via a swap, loan arrangement, that the Fed will do anything necessary to prevent a collapse. We figured the Fed would do this, which tells us anything goes to keep the system in control and afloat. If the system goes down the elitists go down with it and their key to power is lost. As a result of these actions there is a deepening crisis of confidence. In spite of a $1 trillion Fed injection, 10-year Spanish and Italian bonds still yield close to 7%, thus, the jury is still out on how effective the Fed’s action will be.
As we said we should know by May if Europe is going to squeak by for the year, or whether Greece and others will default. Upsets, or defaults could again strengthen the US dollar, but if Europe gains momentum then the dollar will come under pressure, as inflation climbs in the US, UK and Europe. That also means pressure will push gold and silver higher as inflation becomes more and more evident.
As it has been for some time the antics in the EU and euro zone continue to grab attention, but now we have the spectra of war in Syria and Iran to capture our focus when things get nasty economically and financially - history tells us we are supposed to have a war.
You can now understand why the US president was anxious to exit Iraq and prepare for Iran. It is not the intention of Iran to become a dominant power in the Middle East although the US and Israel would like to have you believe that. If Iran has a war with the US, Israel and NATO they have no chance of survival unless Russia and China enter such a fray from Iran’s side. Whether that will happen remains to be seen.
Presently the US and Israel are the aggressors. They and Europe have instituted banking and oil sanctions on Iran, which are acts of war. The US did similar things to Japan in 1939 to goad them into a war. The only thing destabilizing in the region are the actions of the US and their partners. In the process of leaving Iraq the US has opened the door further to Iranian influence in Iraq, although it remains to be seen just how effective that influence will become.
In Syria the government is socialist, secular and based on the military’s predominance. This is the same combination over almost a century that has proved workable in Turkey and Egypt.
Middle East relations have become quite complex since the 1980s and we cannot deal with them here. Syria and Iran have used their influence in Lebanon for the past 30 years. From a military angle Syria has supported Christians and opposed the PLO. Eventually Syria and Iran influenced Hezbollah, which put them in opposition to Israel. We told you it was complex and the relationships go back centuries.
To their credit Syria has limited Hezbollah’s power in Lebanon. The civil disturbances in Syria thus far have been unsuccessful. The way to bring down Syria’s al-Assad is to split the military, but we do not see that happening. Iran is helping Syria and if their support proves successful and permanent that would embellish Iranian influence in the region. It would not however allow Iran to move military forces into Syria, Iraq and Lebanon, contrary to what the US would have you believe. All the US has to do is drop in armored divisions and eventually Iran would be defeated. The bottom line is Iran is going nowhere in the region, because they’d face the US, Israel, Turkey and Saudi Arabia. Again, the aggressor is not Iran, because such a move would be futile. The move against Iran is strategic. The US wants to control the entire Middle East. Pressure on Syria and Iran is growing and will continue to grow over the next several months.
Israel’s relationship with Syria has been a good one. Is Israel willing to risk that? If al-Assad gets removed from Syria then Israel will have to deal with the Muslim Brotherhood.
Iran is nowhere near having nuclear weapons irrespective of US and Israeli propaganda, and we do not really even know that they want to have them. The only way we can know is via cooperation with the Iranian government, not by preparing to incinerate them. Even if Iran stopped their nuclear program completely the US and Israel would still want to find an excuse to take over Iran.
As a result pressure and psywar will continue against Iran as the US tries to find a way to eliminate Syria’s leadership. In the meantime the US has to find a way to control Iraq now that the US troops have for the most part left. War would be very disruptive and could lead to Chinese and Russian involvement, which could mean WWIII. Perhaps Iran will deal with the US, who knows. That means the US has to take down Syria and that is going to take time and it won’t be easy.
Recent confrontations with Iran in the Strait of Hormuz are play-acting. The US still isn’t ready to move on Iran yet. Just look at all the other problems the US faces? For now Iran is another distraction.
The Federal Reserve may push supervisors to accept banks and the government-owned mortgage buyers renting out the homes they own, according to a paper issued by the central bank setting out ways to improve the housing market. In a letter to the heads and ranking members of the House and Senate banking committees, Federal Reserve Chairman Ben Bernanke also said he would push banks and the big buyers of mortgages, Fannie Mae and Freddie Mac, to "find an appropriate balance between prudent lending and appropriate consumer protection, on the one hand, and not unduly restricting mortgage credit, on the other hand." The paper on "the U.S. housing market: current conditions and policy considerations" seeks to provide a framework for considering the issues and tradeoffs in housing, at a time when prices have dropped about 33% from their 2006 peak, wiping off some $7 trillion of household wealth and hurting consumption.
MF Global unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co (JPM.N), one of the sources said.
The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd (MFGLQ.PK) filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.
At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.
JPMorgan spokeswoman Mary Sedarat said the bank did not withhold money because of the line of credit. She declined further comment on details of the transactions.
JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global’s assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan’s interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.
The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.
It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.
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THE INTERNATIONAL FORECASTER
SATURDAY, JANUARY 7, 2012
1/07/12 (2) IF
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