International Forecaster July 2011 (#8) – Gold, Silver, Economy + More
By: Bob Chapman
Wednesday, 27 July 2011
As we write the US government short-term debt extension is still up in the air. Both sides are not about to give up and lose a political victory. The President still is trying to recover from his ill-timed attempt at extortion. That is if a solution is not found by August 2nd, that he will let US bonds fall into default and terminate government’s Social Security obligations. Our question is how can you loot what has already been looted? The account is already empty. We also found it very strange the opposing party members had nothing to say on the issue, but then again it isn’t so surprising. They are all being paid off and controlled by the same group of people. This sort of behavior is fraud, but what does that mean to an illegal alien, who has already broken so many laws that he cannot keep up with the number. If the facts be known the government has plenty of money to keep running uninterrupted. There are those who call the President a scoundrel, but we have better adjectives to describe him.
Essentially, except for current income, to loot Social Security is absurd, because there is nothing to loot. The bonds held in behalf of the Social Security Trust are valueless. They cannot be traded on the open market and must be redeemed by the US government, which is broke. All the President has to do is issue new bonds, sell them to the Fed, and fund SS and Medicare for that matter.
The extension of the short-term debt solves nothing and only throws problems into the future. Like so many things the elitists do, the debt extension is a distraction. The congressional game is being played to keep people’s attention away from the very real economic and financial problems. How can anyone believe that creating more debt will solve the debt problem?
We have to laugh at these geniuses that continue to make economic and financial predictions, which are incorrect more than 90% of the time. Their listeners and subscribers have to be losing many opportunities if not considerable lots of money. Worse yet have been many so-called chartists, waviest and cyclists. You cannot use these props in manipulated markets and worse yet most of these purported forecasters have no experience or professional background to make such decisions. Remember, a fool and his money are soon parted. Furthermore, they do not understand or know the historical perspective of events that have and will take place and why they have and are taking place. Few have the knowledge to understand and those who discovered what makes things happen are reluctant to write about them.
We wonder if Americans and others realize that for 25 years the war on terror has been the excuse to move forward most any agenda. The latest is that is why we need the debt extension. That is totally ludicrous and a visual bit of foolishness some actually believe. There is little talk of making real budget cuts or raising taxes. Almost the entire House is interested in maintaining the status quo. One of the salient points of the whole event points out that Congress is a sad lot. They are happy to receive the benefits of deficit spending without additional taxation. They know very well the way to reducing the budget deficit is to cut military spending. Few propose that because the military and industrial machine has paid these so-called public servants too much money in campaign contributions to say no. Deficit spending is never going to end until the rules are changed or there is revolution. We do not see the House and Senate ending the gravy train anytime soon. 95% of both parties have sold out, so how can anyone expect change. Essentially that means there is little hope America’s problems will be solved by this motley lot.
The EU supposedly has an agreement that will solve Greek problems for a year or so, which will cost $229 billion. Borrowing from the EFSF, the European Financial Stability Facility will be doubled to 15-years, as interest rates on the debt will slide between 3.5% and 4.0%. The debt load itself really won’t change much. Greece is hopelessly buried in debt. It would take 50 years, or more, of austerity and depression to pay the debt and interest off. A bailout is an insane exercise in futility.
Over and over again we refer to the historical record and what can be expected in the future. Who has ever heard of selective default? It must be something like being partially pregnant. In general we understand the plan, but statements vary from what is in the documents. The final figures will vary. Greece will receive $157 billion dollars and governments and bankers will take losses, but of about 1/5th of their holdings.
The agreement will allow countries to default on their debt, but that is not official. Once the seal has been broken we see five more defaults. The terms are not workable. Greece will never work its way out of their debt.
Greek bond maturities will be extended to 15 or 30 years. The low interest rates show you the priority is to keep the euro in place and solvent and to prevent the euro zone from falling apart. There is going to be a new stimulus plan to get growth going via investments. Greece and the other members have to return to public debt at 3% of GDP by 2013. Don’t hold your breath. In this whole episode the bankers want to look like saviors by taking 21% losses, when in fact they caused the whole problem. What started out as a grab for assets has ended as bankers fighting for their existence. That is why maturities can be extended and guaranteed. Again, the EU taxpayers will eventually foot the bill, not the bankers.
Historically borrowers have been going bankrupt for centuries, thus, the conditions in the six European countries in trouble, England and the US are not at all unusual. The key to preventing insolvency is in the hands of the lenders, the banks. You probably wonder why banks make the same mistakes over and over again. Very often it has been for political expediency and in today’s cases it is to break down the financial system as much as possible to force the inhabitants of the US, UK, Europe and the remainder of the world to accept World government. Any professional knows Greece is hopelessly insolvent and other sovereigns will follow. That is why there are only short-term solutions.
The leaders want us to believe that the European Financial Stability Facility, EFSF, will be able in the future to cut trouble off before it happens. Our view is it will be as hide bound as the ECB, European Central Bank, as well as the clowns in Brussels. They will act in a manner similar to that of the Federal Reserve. They will essentially manipulate markets to achieve their desired outcome. This group will officially destroy any semblance that is left of a free market in Europe and relieve the Fed of keeping it afloat. When the EFSF needs funds all they will have to do is call the Fed. These two entities along with the ECB will be the basis for a new world financial control mechanism to control all markets at all times in the typical manner of a corporatist, fascist world state. Those who are busy constructing a world government count this as an important achievement. This will expedite moves toward that goal allowing European taxpayers to pay the bills. These bailouts, such as Greece will be endless, as the economically stronger nations will be forced to carry the others until the entire edifice collapses. This will be the ultimate in oral hazard. This will be the prime moving force to bail out European banks. The public won’t be told that but that is exactly what they are up too.
Remember, these very same banks that will be controlling this European Monetary Fund from behind the scenes created the global finance bubble. The key operative word is monetary and to monetize. The EFSF will do the same thing the Fed does and that is distorting financial perceptions by the major media, which they control and to manipulate market pricing to fit the bank’s needs, not the public’s needs. The effort will be to hide from the public the enormous bubble they have created and from their point of view keep it going in perpetuity. This will lead to dysfunctional, volatile and unpredictable markets. Sooner or later they will again lose control and be forced to find another temporary solution, if in fact they can find one.
Contagion rages and when it becomes evident that Greece is incapable of cutting sufficiently and that revenues are not increasing then the patchwork will come unglued again and a new crisis will begin. That could be in three months or a year, but it is inevitable. The denigration of markets in Europe are in full swing and with the exception of Germany nothing is going to change. The politics of world government is the path the bankers and politicians will follow, so they can complete their goals of enslaving the peoples of the world because they believe they know what is best for mankind.
All major currencies are falling vs. gold and silver, particularly the US dollar and that doesn’t say much for fiat currencies. These weaknesses affect the cost of goods sold in these currencies. Commodities are generally sold in US dollars. If the dollar is falling in terms of gold and silver the price of commodities will rise. As central banks and governments struggle to keep their economies afloat they smother any chance of deflation at least until they have created hyperinflation. The implementation of QE3 and its ultimate cost, probably $2.3 trillion, means that 2 to 2-1/2 years from now we will probably be entering hyperinflation. In the meantime the results of QE1 and stimulus 1 is hitting the economy with 10.6% inflation and 14% by the end of the year. As a result of QE2 and stimulus 2 we see 25% to 30% and when QE3 hits the economy we should approach 50% and hyperinflation. By that time the dollar should be 40 to 50 o the USDX. It is currently 73.5.
Talk of QE3, or its equivalent, will begin in mid-august based on some excuse and become reality in September. That is why gold and silver will rally into September warning you of what is on the way. That is because, like the secret issuance by the Fed of $16 trillion, the introduction of QE3 will be stealth and secret. That process presents another excuse to terminate the Federal Reserve. In this process it will be interesting to see whether other nations deliberately devalue their currencies, as they have in the past, to maintain trade advantages. If they do not their cost of goods exported to the US will climb and in that process bring more inflation to the US.
As a result of the Fed’s actions gold and silver are under strong accumulation. We have just seen the Hong Kong Mercantile Exchange open and are waiting for its positive affect on the gold and silver markets. It is possible their investment power out of China along could be as high as $80 billion, never mind the remainder of Asia.
Comex silver inventories could realistically be only 33% of what they say they have. There is no question the exchange traded fund, SLV, has been lending the shorts silver for delivery illegally. As you know there are no rules for these elitists. They do as they please. We also have believed for a long time SLV inventories are probably about 1/3rd of stated levels, or less. The positions of JPM, HSBC, SLV and others are staked against the reality of falling physical inventory and a deficit of production versus usage, plus investment off take. That means to us that over the next seven months silver could be priced at $70 to $100 an ounce and gold between $2,200 and $3,000.