International Forecaster Weekly

A Monetary Maze From Which There Is No Easy Escape

Little or no control over borrowing from the Fed by banks, Fed helps banks offset their losses, the temporary game of stimulus is still with us, gold the new world currency, Congress and Executive Office refuse to confront, the federal government is broke, the debt is unpayable.

Bob Chapman | August 27, 2011

It has been almost three years since the Federal Reserve took its interest rates to 1% and most recently to zero. This allows member banks to borrow money at no cost. The Fed lends to large banks with little or no control, so that these banks, some of which are owners of the Fed, can really do as they please. The Fed even lends at zero and re-borrows from these banks at a higher level, guaranteeing the banks a riskless profit. Those profits would have gone to the US Treasury and the American taxpayer. These profits for the most part are the result of the creation of money and credit by the Fed. The banks are so overjoyed regarding the results that the Fed has told them that it will keep the current policy for at least the next two years. The banks as a result are making big speculative profits to offset their gigantic losses, while at the same time the economy falls deeper into inflationary depression. This is the tyranny of our almost 100 year old privately owned banking system. The unbridled use of money and credit has led America into a monetary maze from which there is no easy escape. This is what happens when the Fed can create money and credit at will with no gold backing to control such issuance. What the Federal Reserve has done is deprive you of a sound money system. In this endeavor the Fed has deprived you of your liberty and freedom by destroying your wealth and savings via the inflation, which has been the guaranteed result of these actions by those who believe they are the masters of the universe. Once gold backing was removed from the US dollar on August 15, 1971 the old policies were over and the new policies, the results of which we see today, had begun. During the intervening period the price of gold rose from $35.00 an ounce in US dollar terms to its recent $1,900 price. The gain was a reflection of the loss of value of the dollar over those some 40 years. We predicted these results in the early 1960s, but very few were listening. Millions are listening today. The Federal Reserve, Wall Street and banking have been able to perpetuate what they have because of mass ignorance of our monetary system, even by well-educated citizens. This kind of indifference is what brings about the structure that spells failure for our present system. Americans refuse to reduce spending and expanding credit. They believed that the system could go on endlessly. They are in the process now of finding out that could not be the end result.

The temporary game of stimulus is still with us not only in the US, but in Europe and England as well. The G-7 finance ministers and central bankers proffered no solutions, nor did Mr. Sarkozy of France and Mrs. Merkel of Germany. Europeans and Brits soon will return from their annual August vacations, perhaps with some fresh ideas on how to resurrect their economies. Worldwide business has been slowing rapidly since March in spite of massive spending. The European Central Bank, the ECB, has been directly intervening in EU bond markets to keep things going until the vacationers return. They and others face the worst financial problems in a century and vacation comes first. Talk about being out of touch with reality, or suffering from disease known as socialism.

In the meantime the Swiss and Japanese are struggling to weaken their currencies to allow their exports to stay competitive. This is the currency aspect of the flight to quality.

The other safe havens, gold and silver, have via the courtesy of the US government and others who work in tandem with “The President’s Working Group on Financial Markets” have sent gold from $1,900 to $1,700 and silver from $44.00 to $39.00 in just three trading days. As a former professional trader for 25 years, we say if you are going to have a correction, this is the best possible way to have it. The gold and silver markets should turn by Friday and now will be ready to continue their upward movements. They will have little or no resistance in front of them on the upside. These kinds of moves are violent on both sides of the market. Causing sharp corrections is foolish due to the counter moves they create. The best and smart market corrections on both sides are the grinding markets that take weeks or months to accomplish instead of 3 days. You cannot break the backs of gold and silver by such maneuvers when they are the only safe and viable alternative to fiat currencies and profligate monetary and fiscal policies. We have just seen a 3 day 50% correction, which tells us it is time to be a buyer, so that is what we have again done.

Market manipulation cannot detract from the fact that gold is now again the world reserve currency, which will outlast all the criminal machinations of governments and central banks. Just be patient and you will see what we mean. This weeks events remind us of October 19, 1987, when in London we witnessed the US government illegally manipulating the gold market by taking gold down $100.00 for the same basic reason that we have witnessed for three days this past week. You can always trust government and those who control it to act in their own interest and not in the interest of the people. A tip off that these gold and silver moves are bogus is the frightful performance of the dollar that should have been soaring during such a correction, as it did in 2008 gaining 25%. This past week the dollar couldn’t get out of its own way. Up until this week gold, silver and Treasuries were the winners and cross manipulation by our corporatist fascist government is not going to change that over any period of time. Three years ago banks were leveraged 70 to 1 and hedge funds and others over 100 to 1. Today these figures are 10 to 1 to 40 to 1. That is a big difference, so one cannot expect a de-leveraging like we saw a few years ago. Banks are still holding lots of toxic garbage they securitized several years ago and they are still carrying two sets of books, but the wild imprudent leveraged speculation is gone. It has been replaced with moderate speculation. As a result of these events the US society has somewhat changed its attitude in the use of credit. Investors are well aware of market manipulation; naked shorting and front running, now called high frequency or flash trading, all of which the SEC refuses to do anything about. That has driven many investors out of the general bond and stock markets into the safety of investments in gold and silver coins, bullion and shares and that trend will continue. As we are about to find out government debts do matter. That is currently being reflected in German attitudes on the issuance of Eurobonds to fund the economies of six insolvent members of the euro zone and they are justified in rejecting subsidizing losers. They want to cut their losses and leave the euro. They are sick and tired of carrying Europe. That is why many Europeans have been lining up to purchase gold and silver coins, bullion and shares. In Europe today it is difficult to make such purchases.

There is no question that alternative talk radio and the Internet has and is having a tremendous impact worldwide. Americans are finally realizing something is very wrong with our financial and economic system. In the US we continue to see investors leave the stock and bond markets in droves with the exception of gold and silver shares. Each day more people join those already invested in gold and silver related assets. The game that was just played on the American people, the “Budget Control Act of 2011” did not go unnoticed by the public nor did the new, “Joint Select Committee on Deficit Reduction” – known as the “super Congress.” We call the later the Obama Enabling Act, a reflection of the 1933 “Enabling Act” of Adolph Hitler, which allowed him to become dictator.

Congress and the Executive Office refuses to confront any problems our country has. It is always diversionary without permanent impact. Some call it kicking the can down the road. In relation to economic and financial problems the only word they know is stimulus. As long as those behind the scenes are there to pay for their votes via campaign contributions and lobbyists they could care less what happens to the economy. The financial sector and government get what they need to keep functioning and the heck with the real producing economy and unemployment. It never occurs to these people that such spending and debt creation is unsustainable. Worse yet, the current front runner for the Republicans is Rick Perry, twice a guest at the Illuminist Bilderberg meetings, the Texas governor who tried to tie the Texas corridor on the people of Texas for the New World Order, who ordered inoculations for young girls, some of whom died, and who happens to be a philanderer with both sexes. Is this the kind of pervert we want as our President? These are the kind of candidates that are proffered to us by the Council on Foreign Relations and the Trilateral Commission. These are the characters that are funding Mr. Perry. This man is far more dangerous to our country than George Bush and Barak Obama. This is the man the elitists have sent to us to neutralize the candidacy of Rep. Ron Paul for our presidency.

There has not been, nor will there be, any real debate in Congress on the real issues confronting America. That is why we now have our own version of a “Star Chamber”. That is so Congress can be bypassed by 12 political hacks, all of whom have been paid off, otherwise they wouldn’t have their positions. This “Super Congress” relieves Congress of debate, amendments and filibusters. All they have to do is vote on what this Committee gives them and hope no one notices what they are up too. They’ll be flush with giant campaign funds and the protection of the elitists, so what do they care. They will get reelected and they do not care what the cost will be. We might add that the major mainline media is in this scam up to their eyeballs and that you have to get truthful truth and facts from the alternative media, talk shows and the Internet.

These are a few of the reasons why Americans have to pay attention and get new sources of information that inform them of what is really going on. The American system of economics and finance are failing and a new system has to be used to replace the old one that is owned and controlled by Wall Street, banking and transnational conglomerates that in turn own our Federal Reserve. These people at the top have no solutions for the people, only their perpetuation of power and control of the American people. Only about 1% of Americans really understand this problem. About 15% understand a good part of it, and perhaps another 35% have heard of it, but still consider it conspiracy theory. The other 50% is hopeless. They will never understand until it is far too late. People should be preparing for eventualities and most are not. Those storing dehydrated and freeze dried foods, which incidentally our government has been doing for some time, a water filter and a method of defending their family are on the right path to physical survival. For them there is only one investment and that is gold and silver shares, coins and bullion. They are the only safe way to protect your wealth. Gold is on its way to $3,000 to $3,200 by the beginning of March and silver to $100. You do not want to miss the boat.

It is called insolvency. Your federal government is broke having created debt that is unpayable. Under those circumstances, standing in the wings, is government ready to pounce upon your $6 trillion worth of retirement plans, which government wants to exchange for government guaranteed annuities. How can a bankrupt guarantee anything? Just be patient they will come after your retirement just like in the “Budget Control Act of 2011” – they are coming after your Social Security and Medicare, which you paid for. Those who control government do not care about you, you are just useless eaters.

Your jobs have disappeared into the second and third worlds, since the early 1980s. It is called free trade, globalization, offshoring and outsourcing. Those good paying jobs are not coming back unless you make them come back via Congress and tariffs on goods and services and unless you change things your society is terminal. You had best think about all this, because if you don’t there will be no happy ending and you may end up living under a bridge.