LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
International Forecaster February 2012 (#6) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster



-- Posted Monday, 20 February 2012 | | Disqus

The following are some snippets from the most recent issue of the International Forecaster. For the full 37 page issue, please see subscription information below.

 

US MARKETS

 

Several years ago free trade, globalization, offshoring and outsourcing were discussed in the major media. As time wore on the issues disappeared and now it is not easy to find discussions of these policies virtually anywhere as the drain of jobs and companies leave the third world.

 

Not only have the better paying jobs been leaving, but the destruction of economic independence and sovereignty has been a victim as well, something few professionals, never mind the public, thinks about. If America is to ever have an economic recovery there will have to be trade legislation with tariffs on goods and services.

 

Over in Europe in December the ECB received a $1 trillion illegal loan from the Fed. 523 banks quickly borrowed $650 billion and late in February and they will borrow another $850 billion. Yes, they’ll borrow it all and then some, if available you might arbitrarily add 03% to the 1% cost to cover shortcomings of collateral. That isn’t all that bad because the average yield on senior unsecured bank debts are 4.3%. If invested that way that is a 3% return with little risk. They call this a license to steal. We the public don’t get these kinds of offers. That is $1.5 trillion and if fractionalized at 9 to 1 is more than $14 trillion. In a similar situation the Fed lent to Goldman Sachs, JPM and Morgan Stanley and they made $13 billion borrowing from the Fed, so you can see the tremendous profits that are going to be gleaned by European banks. We’d call this a subsidy or better yet a bailout. It is the wish of the ECB and the Fed that the banks purchase domestic sovereign debt, which will push down borrowing costs for governments and reduce the risk that countries in trouble default. In addition, loans made to small and medium sized companies would boost the economy and create jobs. Having $1.5 trillion, banks will assist in purchasing part of the $800 billion of sovereign debt maturing in 2012. Unfortunately, we believe only about 5% of the funds will go into loans, some 55% to refinancing maturing debt and the remainder to buy sovereign debt. What is very interesting is that the ECB is strongly encouraging all banks to participate in the upcoming second auction. The borrowing from auctions 1 and 2 could aggregate $1.6 trillion.

 

This has encouraged the UK government to lend more as well. RBS, previously received $72 billion, borrowed another $78.4 billion from the ECB in December. The savings from borrowing from the ECB at 1%, rather than from the British Government, represents a savings of almost $776 million. The beat goes on. Add this $1.6 trillion to the Fed’s US spending of more than a trillion a year followed by QE 3 and the western world is engulfed in a sea of money and credit crated out of thin air, which will certainly accelerate inflation, perhaps in a big way.

 

The flip side of this lending, if only 5% reaches into the economies of the US, UK and Europe over the next 1-1/2 to 2 years, that represents business loans of $10 billion, at a minimum. This is super charged money and will affect these economies starting in the second or third quarter. That is why all these economies are going to do better than almost all analysts and economists had predicted. They do not understand the strength of this volume of money and credit in turning these economies around. The players all know of the inflationary implications but believe them to be preferential to deflationary depression. It is easy for the Fed to create money and credit, so they have chosen this way, the only way short of deflationary depression, to bail out the financial system over and over again. This infusion of money and credit will continue as inflation climbs. When hyperinflation of 30% to 50% becomes reality the game is over. The big question is how long will it take? We do not think anyone has that answer at this juncture, but we can assure you that with this kind of aggregate creation is certainly going to bring about hyperinflation.

 

The stock market could well reach its old high of 14,700 with such tremendous amounts of money at banker’s disposal, although it could trade at 10,500 due to other underlying problems. A very hard call at this point. There is one thing for certain all currencies will continue to depreciate more than 20% annually versus currencies as they have in 11 of the past 12 years. This is why you don’t want to be in any currencies unless you have to be. They are all guaranteed losers. All are fiat with no backing except for some bankrupt government or privately owned central bank that wants you to believe they are worth something when they are not.

 

We are convinced Iran is a very good poker player. They did not go for the trap set up six weeks ago by the US and Europe. It turned out to be another non-event. Iran knows they are not as yet ready for war. The Iranian oil bourse will start trading oil in currencies other than dollars starting on March 20th. Beware the Ides of March. This is a blatant attempt to challenge the US domination of oil markets and to try to lessen the influence of the petrodollar on the world economy. This is what is at the heart of this conflict.

 

The foolish charade of the US to use a dispute over Iran’s nuclear program is ridiculous. It is all about the powers controlling the US attempts to protect the US dollar as the world’s reserve currency. It should be noted that the oil bourse has been opened since 2008. Iran has the 3rd largest oil reserves in the world and trading oil in other currencies is a major challenge to the US. In March oil will begin to trade in other major currencies, such as the yen, yuan, euro and rupee. As you know India is already negotiating for oil in rupees and gold. Iran would use their rupees to purchase goods from India ending in a fairly balanced trade. The final objection for India is its own tax structure. Indian businesses cannot pay for Iranian oil imports with rupees unless the finance ministry exempted such payments from a withholding tax. We are sure this will be overcome. About 45% of payments will be in rupees and the remainder in other currencies and gold. The India-Iranian oil trade is worth about $12 billion a year.

 

On July 1st, the EU will ban Iranian oil imports. The bourse will have been operating in multiple currencies for 3-1/2 months and if successful this will prove to be a headache for Europe. We hear nothing out of Europe so we wonder if the Continent is preparing? They have to replace 500,000 barrels of oil a day. What happens if Iran shuts off their oil early? That would be chaos and oil being disrupted could climb to much higher prices. As you can see it is going to be a very interesting spring and early summer.

 

When England joined the EU one of the main issues was Britain’s almost fully funded pension plan. It is reality time. Proposed new rules, promulgated by Brussels bureaucrats would force more funds to be held in reserve and to invest in less risky assets. In other words Brussels wants to dictate British investment decisions when European results and funding have been fair at best. All European investments in pensions are under funded and some are badly under funded.

 

This discussion is very important, because it points out that the unnatural association, known as the European Union, has essentially become dictatorial. The proposal would kill off 19% of final salary pensions, which are based on earnings and length of service. It would also push many businesses into insolvency, leading to job losses. It would cost firms about $950 billion.

 

The idea of the bureaucrats is to force the pensions to buy government bonds. That is to fund government profligacy and looting on the Continent. If such a proposal were to be passed it would be catastrophic for European financial markets. Can you imagine the market impact of a switch of $4 trillion in shares and bonds into government bonds? These bureaucrats at the EU have to be totally out of their minds to purse such a proposal.   

 

Later this year and into next year consumer debt is going to become a major problem. It may boost retail sales in the first half of the year, but it should slow sales in the second half unless real employment increases, and we do not expect that to happen

 

In November revolving and credit card debt rose 10%. We do not expect a recovery just a sideways to slightly upward movement such as an increase of 1-1/2 to 2 percent of GDP. Even though the growth will be there it will cost about $1.3 trillion to accomplish. More or less what it cost the past two times. That will consist of higher Treasury purchases by foreigners looking for an alternative to the euro; the Fed’s program of selling the short end of the treasury market and buying the long end; the ongoing net purchases of Treasuries and QE 3, which we predicted would be the purchase of toxic waste bonds from banks, so that those tied up funds could be used to buy Treasuries, shares and to increase business loans to small and medium sized companies.

 

There was a 10.7% increase in revolving credit, such as car loans, mobile homes, boats, etc.

 

As these borrowers are forced to pay down debt, sales will moderate, credit problems will increase and eventually buyers will use cash, if they have any.

 

We have mentioned this before and action probably won’t be happening until the end of the year. This could be a global scandal involving Libor, the London Interbank offered rate.

 

Britain’s Financial Services Authority is investigating trading desks, which exploited information they had about the direction of Libor rates. Obviously there is evidence, but is there enough to convict? This is a $360 trillion market. These are trades from banker to banker. The probes involve several regulatory agencies including the US Department of Justice. Some of the top players under suspicion are JPM, Deutsche Bank, HSBC, Barclays, Royal Bank of Scotland and UBS.

 

Part of the action comes from a Charles Schwab lawsuit against BofA, Citigroup and a host of other banks. What we see here is price fixing. The Swiss are involved as well with EU antitrust regulators. They are pursuing traders who manipulated the spread between bid and asked taking advantage of their clients by front running them. Due to evidence accumulated thus far several banks have already dismissed employers. Thus, it is fair to contend that we will see another nasty set of revelations into the corruption in the brokerage and banking sector.

 

          The index of U.S. leading indicators rose in January and the cost of living climbed less than forecast, pointing to sustained economic growth with limited price pressures.

 

          The 0.4 percent increase in the Conference Board’s gauge of the outlook for the next three to six months followed a 0.5 percent rise in December, the strongest back-to-back gains in almost a year. The consumer-price index rose 0.2 percent in January after no change, the Labor Department said today.

...

THE INTERNATIONAL FORECASTER

SATURDAY, FEBRUARY 18, 2012

2/18/12 (6) IF

E-MAIL ADDRESSES

For subscription and renewal; technical support, log in problems, etc.:

info@intforecaster.com

For correspondence to Bob:

bob@intforecaster.com

CHECK OUT OUR WEBSITE

http://theinternationalforecaster.com/

RADIO APPEARANCES:

To check out all of our radio appearances click on this link below:

http://theinternationalforecaster.com/Radio_Interviews


-- Posted Monday, 20 February 2012 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus


Special Offer:
CGI Central - custom CGI and PHP scripts

** Receive an Introductory Copy of the IF -- Please Use the Form Below**

Required Fields marked with *
*Name
Please enter your first & last name.
*Email
E-mail where free issue will be sent


Please allow 24 hours for a response to your request.



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.