“Get your house in order, because if you do not you won’t like the consequences.”
International Forecaster February 2011 (#8) – Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
Sunday, 27 February 2011
The world is awash in dollars and that is being reflected in the USDX, which are six major currencies versus the dollar. The loss of value is being loudly trumpeted as the IMF says a replacement must be found. This is the same IMF that has been foisting non-gold backed SDRs on us since 1969. Every time they have tried this it has been a failure. We can give the Illuminists an ‘A’ for effort, but what they do not get is that the professionals and investors see right through it. Another batch of fiat currency is not going to solve the world’s currency crisis, which can only be saved by gold backing. Needless to say, the mainstream media will never talk about this in realistic terms, because the elitists control them. The denigration of currencies versus gold and silver are advancing apace, as the elitists day after day try to suppress gold and silver prices.
The major media is as complacent as ever because they are totally controlled. It is not ignorance or incompetence. It is control. The media tells us the stock market is headed higher, but fails to tell us why. The reason is manipulation by the US government, and those who control it, and funds swamping the market via QE2. This is an economy where few jobs are being created, unemployment remains steady and we are told that a rising stock market means recovery, which is far from the truth. Propaganda flourishes as well as physiological warfare. There is no truth for the American people and the people of the world, it is all controlled and capsulated for consumption and control. There is no real recovery; it is all smoke and mirrors to mislead the public. Government and the media declare there is no inflation, but yet it abounds. This is the same media that has ignored the climb in gold and silver prices for 11 years. They have few explanations as to why gold and silver prices are rising. It is because the value of fiat currencies are falling versus gold and silver, but that is not the explanation we hear. We are told a number of absurd falsities.
Gold and silver are just now beginning to break out of government instigated doldrums, which has been government induced by those who own the Fed. None of the old tricks and nostrums is working anymore, so new tactics are being taken. You have seen ongoing attacks on gold and silver that has been going on since 1988, and in the last 15 years they have been relentless. As of late the theme is destroy the gold and silver shares to make people believe that there is little value there, to shake novices out of their positions. The psywarfare plan is to force down gold and silver share prices and gold in order to destroy silver prices so that JPM and HSBC can cover their shorts. It hasn’t worked and won’t work. Needless to say, we get the usual from CNBC, CNN, MSNBC and Fox. Is it a bubble or a craze? Again, what else would you expect from a media which is usually wrong.
The debt and inflation will become more terse as we struggle forward. Government knows it has to cut Social Security, Medicaid and Medicare, screwing the participants and better enabling government to control and reduce these benefits. Allowing government to renege over and over again does not instill confidence in its citizens. There are mammoth cuts coming, but the military industrial complex will experience few. This is how the elitists keep their empire by threat of force. Just look around you and look at the Patriot Act and Homeland Security or the new Gestapo the FBI. Yes readers, you already live in a police state.
As Americans overlook these developments and the fact that anyone who criticizes government is a terrorist, price inflation is destroying their purchasing power and it’s being done deliberately, as a result of saving a broken banking system that only catered to the wealthy and connected. Loans are available, but generally only to AAA corporations and fellow elitists, as interest rates begin their devastating rise into the future. That needless to say will be accompanied by a falling dollar and higher gold and silver prices. Many other countries have duplicated these events, so not only will the US dollar fall in value, but also so will the currencies of most every other country versus one another and particularly versus gold and silver. In case you missed it, or forgot, versus nine major currencies over the past 10 years on average gold has appreciated 15-1/4% annually and silver 20-3/8% annually, thus, these facts are nothing new. They have just been hidden from you. As a result of the loss in purchasing power and ever building debt we have seen demonstrations and riots throughout Europe for the past two years. That has been followed for the same reasons, plus price inflation, in the Middle East with the overthrow of the governments of Tunisia and Egypt. Several more monarchies and dictatorships are on the verge of falling as well. In the US the attempt to radically change retirement benefits and unions has led to demonstrations in Wisconsin, Indiana and Ohio. We believe in time as unemployment rises with prices and there is no economic recovery that demonstrations will increase and they could, as they have elsewhere, turn violent. If police in the US fire on civilians or beat them into submission there will be retaliation and law enforcement will get decimated.
There is absolutely no way the dollar and other currencies can be saved. That is why the prices of gold and silver move relentlessly upward. There already is waning confidence in the dollar and many other currencies, and that is why the USDX, the dollar index, as a yardstick, is inferior to measuring all currencies versus gold and silver. You may not realize it now, but you are living through the collapse of fiat money systems. The future of monetary and fiscal matters will take many twists and turns, some good, some bad. It is far too early to make solid predictions on what routes will be taken. At this juncture it is easy to see where we are headed, but the future is more difficult. It could be inflation, hyperinflation, deflationary depression and another contrived war to distract people from the more important issues of the economy, finance and economic survival. In the meantime in reaction to such events gold could go to $5,000 or $10,000 and silver $100 to $500, as the flight to quality becomes a stampede.
Our studies and intelligence tells us that the elitists running the show deliberately planned a collapse so they can form a world government. For them everything is on the line. If they lose they’ll lose everything. If we lose the same could be true. We are not going to lose, because to many people worldwide already know what they are up too and that what we are experiencing was planned that way. Why do you think QE1 financial sectors were saved in the US and Europe and in QE2 the US government was bailed out. It is very obvious to thinking people as to what is taking place. The edifice that underlies elitist power has been bolstered as the US and European economics are being allowed to fail. Tough decisions will have to be made to save the dollar and the economy and that is not going to happen because those running the show behind the scenes do not want that to happen. The route being presently taken is that of the Fed funding all Treasury and Agency needs including deficit spending. In such a scenario gold and silver prices have no limits to the upside. It could also be that the majority of your gold and silver holdings may never be sold due to the ongoing turmoil the world may be buried in.
The stock market in Dow terms is about 12,400 due to trillions of dollars being poured into the economy via the Fed and QE1 and QE2 and via the manipulation of “The President’s Working Group on Financial Markets.” The insiders know what is going on but investors and the public do not have a clue. How is it that denizens of Wall Street get richer and the poor get poorer? It is because Wall Street and banking control the government. The question arises is the market overpriced? Of course it is, but hundreds of billions of dollars are available to Wall Street and banks to speculate in their rigged game. Can you imagine that it is possible for several banks and brokerage houses every day for months to have no losing trading days? Of course that is not normally possible. That can only happen when they create the inside information. They are slaughtering the average investor. Will the market collapse again? Of course it will, but the timing is very difficult. Perhaps if there is an announcement that QE2 is over and there will be no QE3, maybe major unrest in the Middle East will cause a correction, or perhaps a realization that there will be no further recovery, or perhaps we’ll see demonstrations in the US similar to those in the Middle East? After adding tax-pork legislation of $862 billion last year the administration is asking for $200 billion more. What the Fed has done with zero interest rates and quantitative easing at least temporarily is put a floor under the market. Eventually that floor will crumble as real interest rates climb further and perhaps QE comes to an end. Needless to say, were that to happen there would be total collapse. The US and for that matter, European economies cannot survive without major stimulus. In Europe the financially healthy nations are supplying $1 trillion to six poorer nations knowing full well $3 to $5 trillion is needed. German Chancellor Ms. Merkel says Germany will hold the euro together. Last week in elections in the Hamburg region the voters sent her a warning by crushing CDU candidates. If the CDU wants to be thrown out of office they will continue to advocate more support for sick members of the euro zone. We think the support by Germany is at an end and that means it is only a matter of time before the euro is history. In this regard the G-20 meeting went nowhere, as sick nations demanded that the solvent nations stop exporting so much. One asks where does it end.
Eventually the Dow will fall. When that will begin we do not know, but if it follows history it should fall to 6,650 and then to? Dow 3,200. It could fall lower, but 3,200 is the goal. The damage wreaked on the economy by deficit spending and QE will take years to correct. The longer the upside continues on the Dow the higher gold is going to go because in terms of gold the US dollar and other currencies will continue to fall. That is why the US Treasury and the Fed and other central bans want so desperately to stop gold and silver from going higher, which gets more difficult with each and every day.
That brings us to the performance of gold and silver shares, which have been under attack by government consistently for the past 15 years. You have major shares prices reflecting in many instances reserves at $300 an ounce or at 25% of gold market prices. Many of these operating companies are reporting profit increases of 20% to 40%. We have been involved in mining shares for 51 years and those who try to put a P/E ratio on producing mines are pursuing a futile quest. The reason is the enormous leverage in these shares that you are now seeing. In 1980 producers saw P/E’s of 350 times earnings. Gold is the perfect hedge against the collapse in value of other assets, currencies and inflation. For 6,000 years it has had no peers. Silver runs a close second as a store of value. Gold and silver are a reflection of the real value of currencies and are the most stable assets in the world. The proof of the dominance of gold and silver over the past ten years has been performance. Versus nine major currencies the average currency has lost 15-1/4% annually versus gold and 20-3/8% versus silver. There have been no assets that can come close to matching that consistent return and the trend is still upward. We wonder why CNBC, CNN and Bloomberg don’t site these statistics on their programs? You all know why, it is because the elitists behind the scenes own the media. So as a result you get totally managed and slanted news. There is never dissension and truth.
We have talked about an eventual market correction. We have just seen over the past six months the breaking of the bond market bubble and real estate continues its downward slide. That leaves gold, silver and commodities as the select investments.
In recent years real estate has proven to be a poor hedge versus inflation, as it still resumes its downward journey. It has become illiquid at market prices and can only be liquidated at severely reduced prices. Over the next few years massive inventory overhang will take prices lower and then there will be years of stagnation. That doesn’t sound like a very good investment to us.
We just saw the 10-year note fall from a yield of 2.20% to its current yield of 2.60%. We believe rates over the next two years could reach 5% to 5-1/2%. If we are correct that means 30-year fixed rate mortgagees could move to 6-1/2% to 7%. It also translates into large bond losses.
The biggest question is will there be a QE3 and hyperinflation? We do not know for sure, but all the signs point in that direction. That means as inflation rises so do gold and silver related assets. Will we then see a flight to quality to gold and silver? Yes, we will. They will be the only game in town. We have been in an inflationary depression for two years. Next is higher inflation, probably hyperinflation and then deflationary depression. In all these environments gold and silver related assets will be the only place to be. These are the truthful facts of life today and a clear snapshot of where we are headed.
Get your house in order, because if you do not you won’t like the consequences.