WISHING YOU A HAPPY AND PROSPEROUS NEW YEAR
THE INTERNATIONAL FORECASTER
(We only print excerpts from the IF)
US MARKETS
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.
COMMODITIES
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
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.
ASIA
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.