WISHING YOU A HAPPY AND PROSPEROUS NEW YEAR
THE INTERNATIONAL FORECASTER
(We only print excerpts from the IF)
Obviously, the left segment of US elitists, like the European contingent, is not happy with the Bush policy machinations. Former Secretary of State Madeline Albright told Fox News analyst Martin Kondrcke that she suspects President Bush knows the whereabouts of Osama bin Laden and is simply waiting for the most politically expedient moment to announce his capture.
David Kay, the CIA advisor who headed the US led search for WMD, is quitting before submitting his assessment to Mr. Bush in February. Mr. Kay is a strong believer in that Iraq had WMD. He obviously found nothing, which means Mr. Bush will abandon his hunt for WMD. We expect this politically-charged issue will influence his coming reelection campaign. Mr. Bush will try to dismiss the issue and change the justification for the war, but we don’t believe it will work. What is truly disturbing is that Mr. Kay’s departure has appeared nowhere in the US media.
The weak dollar is due to an unnaturally strong dollar policy from 1994 through 2001, and record current account deficits and fiscal deficits. There is no end in sight for deficits and huge personal, corporate and governmental debt. All the temporary good news derived from tax cuts and aggregate creation is being offset by the foregoing. Keynesians believe the market should be going higher. They just don’t understand that the dollar’s problems are systemic and that the dollar reserve standard has no gold backing making the currency a fiat currency. The dollar sell-off is so overwhelming nothing can stand in its way and as an antithesis nothing can stand in the way of gold’s upward climb. You can’t have such massive net debt and keep interest rates at virtually zero. The lower dollar as we predicted isn’t helping to lower the current account deficit. We don’t export enough anymore to make a difference. Why would any foreigner want to invest in short-term US Treasury paper at 1% when they can purchase euro paper at 2%, British paper at 3.75%, Canadian paper at 2.75% and Australian paper at 5%? Plus the fact those currencies are appreciating against the dollar. The euro is trading over $1.24 despite the euro’s internal crisis caused by the abandonment of the “Growth and Stability Pact.” EU control of reckless deficit spending doesn’t exist and France and Germany run the EU as their private fiefdom. Doesn’t this tell you something? In spite of the EU still being in recession the euro climbs versus the dollar. This tells you the dollar is extraordinarily weak. Once the euro reaches $1.35, some investors will switch massively to gold because Europe has been and will be worse off than the dollar. Billions of dollars are being sold by investors and professionals in Europe every month. European central banks have been forced to bid for US Treasury paper. How long can their buying continue? Not very long. The Asians are trapped, yet we already see across the board selling particularly from China. If Japan wasn’t the mega-buyer of last resort the bid to cover would be under 1 to 1. It’s only 1.7 now. The Treasury needs $1.5 to $1.8 billion a day just to cover its current account deficit. Those dollars instead of being reinvested in dollar assets are going to pay for US imports or they are reentering the already bloated US money supply. This has to eventually cause price inflation because as the dollar falls import prices also rise, further aggravating inflation. Don’t forget the FED cannot allow deflation to take over because if it does we have depression and its game is over. That, of course, will happen eventually. These are fundamental economic truths that cannot be avoided. The system must be purged of its excesses in order to function and survive. The losses have to be taken, that’s why gold has to go up. It’s the only real alternative besides silver. Remember once interest rates rise, the real estate market and then the US economy will collapse. The dollar is off 30% in euro terms. We believe it has another 40% to go. All the support the EU can muster will not stop the rise of the euro. Even euro sales to buy gold. Ladies and gentlemen, its game over and the fat lady won’t sing for four to five more years. A lower dollar and higher gold prices are a guaranteed, once in a lifetime lock. If you aren’t in the game, you can’t win.
On December 23, 1913, the Federal Reserve was created by world elitists. It was supposed to end recession and depression. Sixteen years later, the FED ushered in the worst depression in American history, followed by scores of recessions. After being directly and indirectly responsible for mega-aggregate creation during the 1920s, the FED shrank the money supply in 1930 by 30%. Over the last four years the FED directly and indirectly was responsible for an infusion of over $7 trillion into the economy and over the past four months has halted aggregate creation. Is this a replay of 1930? Can the FED hope to control money supply and interest rates simultaneously? Answer – this could well be a replay of the 1930’s and no the FED cannot do both at the same time. Low interest rates shrink the money supply. Spendable funds are removed from the system as yieldless money-market fund holders’ switch to Treasury notes and bonds. This course is a holding action in the short term. It means eventually that interest rates have to rise, because money supply will continue to shrink.
In the past, we have not seen such a rush to forgive debt as we see in Iraq. In fact, attempts to block and cancel debt have stopped by money center banks in Russia, South Africa, the Philippines and in Haiti and Argentina. Why is James Baker running around getting Middle East and European debtors to cancel Iraq’s debt? Because that debt repayment is taking money from reconstruction, which will go to Halliburton, Bechtel, and Exxon. If debt is cancelled, it is essentially a contribution to the reconstruction process and that relieves the debtors of having to contribute. That allows the US taxpayer to fund the remainder of the reconstruction. The ideology of the Bush White House is simple old-fashioned greed. There is only one rule that appears to matter. If it helps our friends get even richer, do it. Who cares how many American lives are lost. These crooks have created a monopoly on contracts and it’s glaringly evident, yet we hear nothing from the mainstream media, that’s of course, because they own it. You can only find the truth in newsletters like the IF or on the Internet. Our country is being looted by the elitists and no one has the guts to expose it.
Its official, George W. Bush has lied again. Yes, our troops captured Saddam Hussein, but only after he had spent some time in Kurdish captivity. The Kurds cut a deal with the US and then deposited him for pickup by US Forces. He was turned over to the Kurds by a member of the al-Jabour tribe, whose daughter had been raped by Saddam’s son Uday.
The population of Iraq is evenly split between Sunni Muslims in the north, generally controlled by the Baath Party and Shiite Muslins in the south, who follow their Clerics. These same Shiites were betrayed by our CIA in 1991. They were led to revolt against Saddam Hussein and then hung out to dry, just like we hung the Hungarians out to dry in 1956 by dropping them the wrong ammunition for their weapons. The Russians slaughtered them just as Saddam slaughtered 20,000 Shiites whom our government betrayed. Saddam is now supposedly in custody and the Shiites have an acquired hatred of the CIA and Americans. Thus we can expect a step-up in hostilities in the south of Iraq soon.
What is going on in financial markets is true culture distortion. Few think anymore in our society as the economy and all financial markets are manipulated. We suppose people are in denial and want the present system to stay in place, which is impossible. It also means the FED will simply have to flood the world with money. No matter which way they cut it the dollar standard is doomed.
GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS
We can promise you a few years from now the elitists will miraculously discover the gold standard. We are hearing whispers at the highest levels that this will be the next step by elitists. That is a natural step, particularly if the US still has its gold in place. We can also promise you the elitists have been accumulating gold as they suppressed its price. What better way to buy all you want cheaply.
Canada lags far behind the US in productivity and living standards. In 2002, GDP purchasing power was 17.2% less than the US at $36,100 and goods in Canada overall cost about 30% more than in the US. Global foreign direct investment in Canada dropped to 2.9% last year, from 7.1% in 1985. Over the last four years, a good part of the drop can be attributed to offshore manufacturing and Chinese imports. Effective tax rates on capital are 12% higher than in the US. The economy grew 1.1% in the third quarter as the US economy supposedly grew 8.2%. We believe US growth was 3-3-1/2%, but that is triple Canada’s growth. Yes, the Canadian dollar has gone from .63 to .77 versus the dollar, but for a long time the US dollar has been overpriced. Irrespective 84% of exports go to the US and only 23% of US products enter Canada. Canada’s unemployment officially is 7.5% and the US 5.9%. If you pencil in Canada’s social net and the US lies, they both are over 13%. Those figures will only worsen as manufacturing and jobs move offshore and world recession returns. Spending in Canada is too high and taxes must be raised to accommodate the spending and you can expect more of the same. New Prime Minister Paul Martin, an elitist, is a social liberal and a fiscal conservative. Martin, when previously in office, increased federal spending and taxes. He is a colossal public spender with a fascist streak for government intervention. Rockefeller tells Maurice Strong what to do and Strong tells Martin what to do. High taxes for years have sent many of Canada’s best minds to the US to make a better living and that situation will worsen unless he initiates drastic reductions in federal taxes to offset provincial tax increases and cuts spending. This government is in surplus, so there is no reason he can’t do these things. It’s a must because Canada will continue to come under stiff pressure from Chinese manufacturing and outservicing to India.
China’s current boom is unsustainable because it is based on a massive extension of credit. Over the past year, M2 is up 21.6%. The growth of fixed assets was 23% in 2003, contributing 60-70% of GDP. Government expenditures accounted for only 2% and domestic private capital investment rose to $640 billion. Part of this investment will increase auto production by 30% by 2007. China will grow in leaps and bounds but inflation is on its way up.
For more information about Bob Chapman, see his HoweStreet page.