International Forecaster May 2011 (#5) – Gold, Silver, Economy + More
By: Bob Chapman
Sunday, 22 May 2011
The amount of money and people withdrawing from 401K’s has been staggering and Wall Street and government do not like it one bit. There are those who have been fired, run out of benefits, and half to cash in part or all of their retirement. The villainous ones are those still employed, who have taken up to three loans, many of whom have bought gold and silver with the proceeds.
That said, Senator Herb Kohl, Senator Mike Enzi have introduced legislation to limit citizens to tapping into their 401K’s, called “SEAL 401K Savings Accounts.” The bill would reduce and limit the number of loans workers may take from 401K’s and give participants more time to pay back loans after losing their jobs. In addition, employers would have the option to reduce the number of loans for their plans. At the end of 2010, 28% of participants had loans outstanding, a record. The average loan balance was $7,860.00 and 58% of plans permit participants to have two or more loans at a time. If participants are fired or lose their jobs 70% default on their loans.
Workers generally may borrow as much as 50% of their vested account balance up to $50,000. The loan must be repaid in five years, unless the money was used to purchase a primary residence. The average interest rate is 1% over prime.
We find it of more than passing interest that Mr. Kohl is not running for reelection next year.
If you are going to borrow from your 401K’s do it now, ahead of this legislation, that could interfere with the purchase of gold and silver shares, coins and bullion. This is the main reason for this legislation, to stop you from protecting your assets. Of course, such loans involve selling holdings in the 401K’s and that puts downward pressure on stock and bond markets, or takes incoming funds destined for those markets away from those markets.
One aspect of a new and improved federal regulatory scheme is the seizure of 401(k) retirement plans and the subsequent government-administered disbursement of the funds.
In Chapter 3 of the Annual Report on the Middle Class released in February by Vice President Biden and the White House Task Force on the Middle Class, the Obama administration calls for enhancing the “retirement options” for the middle class by imposing “new regulations to improve the transparency and adequacy of 401(k) retirement savings.” [Read the entire article:
http://www.thenewamerican.com/index.php/usnews/politics/3478-obama-administration-plans-to-seize-401k-retirement-accounts [Here is your proof, as we have been telling you over and over again, get out of your 401Ks and IRAs before you have nothing more than a promise to pay from a bankrupt government. Bob]
It is difficult for observes to get the perception that very dangerous financial and economic events are just around the corner. We find up to a certain point those in power more often are able to pull another rabbit out of the hat. Not that the problems have been solved. They haven’t been solved. All of the assistance, as temporary as it may be, has gone to the world financial community and governments. We seldom hear the question why did these financial experts and governments get into such a horrible state of affairs? All we hear of is saving them and allowing them to keep two sets of books, so they can write off their losses over the next 50 years. We don’t expect you to get such a comforting arrangement. These are the same lenders that if you are late on a payment your interest rate goes from 6% to 30%. To say the least the lenders and governments are getting away with financial mayhem. We find it of great interest that the Federal Reserve and the European Central Bank find it appropriate to buy bonds known as toxic waste, those are bonds containing mortgages, and find it necessary to keep secret what they are paying lenders for these bonds syndicated several years ago. Then previously there was the matter of divulging who the Fed loaned money to during the credit crisis. It took two years to get that issue adjudicated at the appeals level. The Fed wouldn’t divulge because they said what they had done was a state secret, a position totally untenable; which the court disagreed with. The Fed just didn’t want anyone to know who they were bailing out. They were bailing out select elitist corporations not only in the US, but in foreign countries as well.
Anyone with a drop of sense knows that if official interest rates rise, or if continuing debt expansion is halted, the bottom will fall out of the US economy and the world economy with varying damage. Still about 60% of foreign reserves are held in US dollars, the world’s reserve currency. Since 1988 central banks generally speaking have been sellers of gold at the behest of the US government and the Federal Reserve in order to suppress prices and rid the world financial system of gold backing. Gold acts as a control mechanism limiting a country’s ability to create money and credit. Under neo-fascist Keynesianism the creation of money, credit and speculation was to be allowed to run rampant, as we have seen for some years. All of the profits went to the transnational conglomerates, as the losses were dumped on the public. We would call that a one-way street. The debt created from a recent historical perspective is without precedent and continues to grow in the US and in Europe. Over the next two years it is estimated that $3.6 trillion has to be rolled over plus new debt.
We see Greece, Ireland and Portugal essentially bankrupt and ready to enter the fray is Spain, Belgium and Italy. Contagion is already with us to the tune of $4 trillion, a sum Germany, France, the Netherlands, Austria and Finland cannot finance without bankrupting themselves. We wonder who is going to buy such debt? Probable lenders such as China only have a limited interest, because as it cuts back on US Treasury paper it buys gold, silver and commodities. Why shouldn’t they when the drums of war are in the distance? Besides, China has inflation of 10% to 15% and has seen home prices in Beijing fall almost 40% recently. That probably will spread countrywide. As in America, Spain, Ireland and England that means mortgage defaults and bank losses. That will lead to recessionary conditions and a drop in imports, which will negatively affect sellers to China such as Japan. We can assure you that a slowdown in China will affect the entire world. That means China probably will not be a buyer of foreign bonds in the numbers they have been in the past. The US TIC Report already bears this out and thus; Spain will probably not get the money it is looking for from China.
In the US the Fed probably will buy $1.6 trillion in Treasury and Agency debt over the next year, although we see the Treasury currently tapping government pension retirement funds to fund the lack of US debt extension and that license could be used to relieve the Fed of some of the burden. Needless to say, that is not a permanent solution. If that tactic is employed private pensions, as we have warned for the past two years, could become a victim of the government as well. At the same time the world economy is again slowing and that does not bode well for borrowers either. In spite of US government manipulation of markets everything they do is only temporary. The markets are far too vast for them to have any lasting effect. Just look at the last 11 years, gold has gone from $260.00 to almost $1,600 and silver from $3.80 to $49.50. As well over the past 11 years nine major currencies on average per year have fallen more than 20% in terms of gold and silver. That means you do not hold or invest in currencies. As an alterative, historically gold and silver have been the safest place to be.
Those in power behind the scenes believe they can create recovery by simply following the Keynesian model, which is print money and credit forever. Their policies are not working in the public sector. We see higher sales figures, but they are the result of inflation. Debt saturation and its continuation won’t solve the problem; only purging the system can solve the problem. The bankrupt have to be allowed to fail. Too big to fail has to come to an end. The world financial system has to be purged and the only way to do that is to call an international meeting and revalue and devalue all currencies against one another and have a multilateral default on unpayable debt. Then nations can decide what the new world reserve currency will be and whether it will be gold backed.
The foreclosure problems in the US and Spain are beyond believability. In the US monthly inventory for sale is normally 4 to 5 months, presently it is 3-1/4 years and should be four plus years by the end of the year. In Spain the visible inventory is 50,000 homes, but in reality it is much higher than that. Worse yet, the banks are lying about it just as they are in the US. Even at 30-year fixed mortgage rates of 4.61% people do not quality to buy. Home prices will fall at least 10% by yearend and more next year and into 2013. Then they will bump along the bottom for years. In the US lending has dried up and it is more difficult to get loans than it has been. Housing debt is unbelievable and is unpayable. There is no recovery in sight in spite of spending of more than $2 trillion on QE2 and stimulus 2. We can assure you QE3 or something like that is on the way, otherwise it is collapse. The Fed has to come up with $1.3 trillion to purchase Treasuries and Agency securities, June to June just to stay even. Our guess is that figure in reality will be $2.1 to $2.5 trillion, as the dollar reaches new lows. The flipside is in spite of government manipulation, gold, silver and commodities will move much higher in the flight to quality and safety. There is absolutely no reason to believe that debt will be repaid nor will there be any recovery. Every single day people all over the world are losing purchasing power due to inflation and the profligate policies of their governments. There has to be a well planned or orchestrated plan for default by all nations collectively. This is why your investible funds have to be in gold and silver coins, bullion and shares. That is the only place investment funds are safe. Just look at the last 11 years during which gold and silver rose by more than 20% on average versus nine major currencies annually. Is that not enough proof to convince you where your funds should be? Quantitative easing has to continue and so does the upward valuation of gold and silver coins, bullion and shares.
Food and oil demand continues to increase as the third world experiences more prosperity and growing populations. That is one of the results of free trade; globalization, offshoring and outsourcing hadn’t planned on. Having created these conditions they now talk of reducing world population, a condition they call a surplus of useless eaters. As a result banks and hedge funds are again leveraged as they were in 2008. Fortunately most are presently short gold and silver related assets.
Once it becomes visible through the veil of government propaganda that conditions are deteriorating real interest rates will rise sending bonds down and the stock market will follow. What else can they do with no recovery, a falling dollar, 22.2% real unemployment, 10% inflation, a minus GDP and exponential creation by the Fed and the Treasury of money and credit. As the printing presses roll on we see shortages in physical gold and silver, which soon lead to higher cash prices. As we have predicted correctly for 11 years, no matter what the Illuminists do they cannot arrest the flight to quality in gold and silver.
The past few weeks have seen some staggering events in the commodities, gold and silver market. As you all know JPMorgan Chase and HSBC have been naked short both gold and silver, but particularly silver. In the case of silver, the CFTC, the Commodity Futures Trading Corp., has seen fit to allow Morgan and HSBC to continue to corner the silver market. We saw JPM and HSBC essentially stand by in the futures market, as silver climbed higher. In the futures market they do not seem to have altered their positions to any great degree, so they have to be doing their trading in the opaque, unregulated derivatives market. Then there have been the unprecedented actions by the CME/Comex, which raised margin requirement five times in nine days. They were elevated from $4,500 to $9,500 – previously and then the following five changes moved margins from $9,500 to $21,600. Even more importantly major commodity brokerages doubled those margin requirements from $21,600 to $42,000. As a result most speculators in the small and medium categories were wiped out. This was unprecedented as well. We, of course, ask why all these brokerages decided to simultaneously double core rates? We don’t believe in coincidences, thus could it be they and the CME were propelled to do what they did by some powerful outside force, such as our government? We cannot prove that, but the actions of these players are very suspect.
We know that presently the CFTC, SEC, NYSE and Nasdaq are receiving 3,000 complaints a day up from 1,000 a week ago, claiming the gold and silver markets are rigged and naked shorts are allowed to control these markets.
Here is a response by the SEC and answer by a subscriber to the SEC.
“Thank you for contacting the SEC. Before we are able to respond to your email, we need more information from you: including your supporting documentation that JPMorgan is making illegal naked short sells and its manipulating the gold and silver markets.
Here is the subscribers answer: It is my feeling because of the large naked short position that JPM and HSBC are allowed by the CFTC to carry, that they were in part responsible for the action of the CME/Comex and the simultaneous conclusion by a number of major commodity houses to double the CME margin requirements to their clients. It is not my place to provide supporting documentation. That is your job. Why do you think I am writing to you? Investigate and come up with some answers. Do not defer them to me. Are you not supposed to be protecting me as a regulator? I await your answer.”
This shows you the high handed brazen arrogance of our regulators. They know exactly what is going on with naked shorting and won’t do anything to stop it.
JPM is a major shareholder in the privately owned Federal Reserve, which is no more federal than Federal Express. For years they have been allowed to run roughshod over the markets making fortunes in the process. Back in 2005 we recommended a long position in natural gas at $3.80. The market ran up and we recommended sale at $14.50. At $15.00 JPM was allowed to deal in natural gas, which promptly fell to $4.50 after they participated. A very strange coincidence, which in that process wiped out a major commodity player. We believe JPM rigged the market, but we cannot prove it, because we cannot access their records and the CFTC had no desire to do so. This is the same kind of treatment we are receiving in the silver market today. You should all be writing to every representative and senator in Washington, the CFTC, SEC, NYSE, ASE, and Nasdaq and registering your complaints because the squeaking wheel gets the grease. Even if they do nothing they will all be aware that millions of investors know what they have been up too. Do not forget this is nothing new and the regulators know that. Morgan, HSBC, Barclays, Goldman Sachs and Citicorp among others run the markets exactly as they please with little or no interference, because they control the US economy and your lives.
The markets are all rigged and it is up to you to let the above entities mentioned above know, that you know what they are doing and you want it stopped now.