International Forecaster Weekly

Gold Responds To A World Of Financial Instability And Liquidity

We have yet to learn the real price of gold, we ponder the loss of stability and currency value, Fed and US Treasury manipulations of financial markets, the death spiral of fiat currencies, Euro zone still struggling, Goldman takes a hit in Asia, money or liqidity sloshes about the financial system.

Bob Chapman | March 7, 2012

The Pan Asia Gold Exchange (PAGE) – was to represent real price discovery and that is yet to happen. The first move to smother the exchange was by an increase of holdings in the endeavor. This move was to stop them from constructing their own platform rather than buying an existing platform. Due to that move shareholders rose from 10% to 25%. That brought in additional directors whose job it obviously was to stop the fully allocated spot contract. One of these directors was a US banker who has worked for the Federal Trade Commission, the Sloan Foundation at MIT and whose wife is a member of the CFR, the Council on Foreign Relations. Thus, nothing is going to happen to this venture until next year for a variety of reasons. Fortunately a new exchange is on the way to replace PAGE, which we will fill you in on in a few months. Once underway it will first trade silver. The Chinese regional exchange recently phased out of gold trading and is setting up to trade silver in the domestic currency – the RMB. Accounting will take place monthly and will be held in private facilities, not with bullion banks. That way they cannot illegally hypothecate the silver. No 350 to 1 leverage. Only trading for cash delivery. In the final analysis this new vehicle will be out of the hands of the illuminists – it will function far better and draw major international players.

 If you are looking for a reason for the attack on silver this past week just look at the gold cartel’s net short position, that rose from 160,000 contracts on 12/31/11 to 229,000 just a week ago. The total net silver short rose from 14,000 to 39,000 an increase of 178% as silver rose 30%.

Silver was on its way to break $40.00 and gold $1,800.00, and something had to be done or the criminals were about to lose control and a lot of money.

We don’t write much about gold and silver even though they are our favorites as investments and have been for 53 years. As a result of the historic value gold and silver have been the only lasting objects of true value over the last 6,000 years. The elitist central bankers have over and over attempted to change that with little success. The power of bankers in modern times began with the 1600s after the collapse of the Hanseanic League – an event as devastating as the fall of Maritime Venice in 1348, which just happened to be the year of the plague in which half of the people in Europe died. Here we are back at square one again, as the bankers go for total control again. The fractional banking system is in the process of imploding as it has so many times before. The debtors either cannot pay what they owe on payable debt that has saturated the system. Thus, the bankers are about to be again financially destroyed. It is time for creditors to be destroyed.

The last leg of our current problems began on 8/15/71, when the dollar had been so undervalued that gold backing was removed and the dollar, the world’s reserve currency, was left to float as just another fiat currency. The dollar stability created by gold was gone and it was only a matter of time before it lost 98% of its value, which is what has happened over the past 41 years.

Unfortunately, other nations have been doing much the same thing and face the same end. Today’s euro is a good example, a currency that should never have been created. Once backed 15% by gold is now backed 7% due to the ECB’s joining into the game of gold and silver suppression. Mostly secret sales of gold to artificially suppress its price, so that investors would not want to own it as opposed to real estate, stocks and bonds. As a result we have two currencies that are failing simultaneously. We are often asked why does the dollar index hold up the way it does? That is because the USDX is really next to worthless. Seven major fiat currencies versus the dollar, how dumb can that be? Nothing versus nothing. The only way to access the value of any currency is versus gold and silver. That is why between 8/15/71 and 1/15/80 gold rose from $35 to $850. That was far, far better than the Dow. Is it any wonder the banker elitists have suppressed gold and silver prices for so many years? It is the only real money and they know that.

It has been legal since August 1988 to manipulate market prices due to the Executive order signed by then President Ronald Reagan called the “President’s Working Group on Financial Markets.” During the 1960s, 70s and 80s, the Fed and the Treasury manipulated the gold and silver markets illegally at will. We know we watched them do it. We wrote and complained about it and it went nowhere. During that timeframe at least 60% of all gold sales were by central banks. Since 2000 some 1/3 to ½ of sales were by central banks to suppress prices.

The events that shaped the bull market in gold and silver were the sale of gold by Great Britain at or near the bottom of the market in 1999 to bail out banks that were short and the topping out of the stock market dotcom rally in March and April of 2000. The real estate craze was still a few years away. In reference to the British sales, it was verified that the big buyer of half of the British gold that was sold was to save two major banks.

Over the past 12 years central banks sold physical gold, leased gold that is tantamount to selling and using derivatives to suppress prices. Central banks and the IMF say they have 33,000 tons of gold. No one knows what they have because they never tell the truth. Our guess is they have between 5,000 and 15,000 tons, all of the rest has been sold. Such market manipulation has given citizens in all countries an unparallel opportunity to purchase gold at prices far below its actual real worth. Based on these circumstances not only does gold offer safety in an inflationary world, but it also offers an opportunity for some to become fabulously wealth. Based on this evidence for the past several years many sovereign states have been gold buyers and we expect to continue in an increasing way. They certainly do not want to get caught up in the vortex that will consume all fiat currencies in the end. The death spiral is already in process and that is why all investors should be buying gold and silver coins, bullion and shares. No matter what the Illuminists do they cannot hold back the tide of history.

Over the next several years the game that we have been entrapped in for many years will be over. We will return to a gold backed currency. Remember, he who has the gold makes the rules.

Week after week, month after month and year after year for 2-1/2 years we look aghast at the idiotic antics of European bankers, politicians, and bureaucrats. The monstrosity known as the euro zone continues to flop around like a fish out of water. What are we looking at now - the 5th or 6th bailout? On one hand they talk about the March 30-31 meeting in Copenhagen and the IMF spring meeting on April 20th to 22nd in Washington As you can see overall participation is two months away that is if another short-term bailout is implemented in March. Then again even if implemented will a new Greek government recognize it? Euro politicians in general have weak domestic support for extended funding for Greece and others. As a result France’s President Sarkozy and Germany’s Chancellor Merkel are very liable to be missing from the political scene in the winds. Germans are well aware these sovereign fiascos are costing them $300 billion a year and that the only way that will end will be by ejection of Greece, Ireland and Portugal for starters. Italy and Spain could follow. That would probably end the euro. Saying one thing and doing another can only be tolerated for so long. Europe is on the edge as unemployment rises and GDP falls, while banks sit on $1.4 trillion in loans from the ECB via the Fed of which $1.1 trillion worth sits at the ECB losing 3/4% interest. You have to ask yourself like at American banks, why would banks take losses and not lend? It is because they are not interested in recovery, but in saving the financial structure. Remember, a level to falling economy inhibits inflation. If the situation goes to far toward deflation the bankers just turn the spigots on again. You might find of interest that in the recent LTRO borrowings Italy took down $185 billion and Spain $160 billion to total $345 billion of the total tranche of $704 billion, or about 50% of the total. Those figures are for banks, not central banks. There is plenty of money for business and recovery, as in the US, but it is being held back to keep the financial sector from collapsing. What did you think the loans were all about? Even German bankers were borrowers. While this game of smoke and mirrors and excessive creation of money and credit goes on the bankers lifeline is extended another couple of years until the next $1.4 trillion injection.

FFw/JB Podcast (3/1/2012): Bob Chapman

Alex Jones Show for Friday, March 2, 2012

Bob Chapman - Discount Gold and Silver Trading

Bob Chapman - Goldseek Radio - 02 March 2012

Interview 473 – The International Forecaster with Bob Chapman

The Power Hour with Joyce Riley

Bob Chapman - LibertyRoundTable - March 5, 2012

Bob Chapman - Financial Survival 1/2 - March 5, 2012

Bob Chapman - Financial Survival 2/2 - March 5, 2012

Bob Chapman - USAprepares Radio Show - March 6, 2012

Bob Chapman - National Intel Report - March 6, 2012

As we look back over the EU and its euro zone we see almost nothing but failure of another experiment in socialism, which in this case involves 27 countries. How can you have austerity and at the same time expect recovery from non-existent revenues? It is a no brainer that such a policy cannot work without extraordinary circumstances. If Greece fails it will certainly be interesting as to how the banks write off that unpayable debt. Our guess is they will again use two sets of books and again get recapitalized. Whether the write down is 70% or 100% it is undoable.

Here we are after four years still flaying around in the forest with no solutions. As we said, 2-1/2 years ago on Greek TV and radio – leave the euro and return to the Drachma with a 50% or 60% haircut. Then clean up the mess and do what is necessary to compete again There has never been and never will be a chance that Greece can do anything but totally default.

As a result of these problems year after year Germany and other countries have paid an exacting price. Needless to say, these countries are not happy about the arrangement.

Lurking behind the scenes, as always are the degenerate bankers who want to grab as much as they can. It is not only Greece, but also the five to follow, that will have to be supported indefinitely, or be allowed as well to fail. Not to be slighted are the UK and US banks that hold large positions, in Greek and other European sovereign debt. Incidentally, those owning CDS, Credit Default Swaps, had best forget collecting on your insurance, because the NYC banks have no intention of paying off, nor do they have the funds to do so. Corruption reigns and confidence is non-existent. It is only a matter of when before the bottom comes out.


Last week the Dow was unchanged, S&P rose 0.3%; the Russell 2000 lost 3% and the Nasdaq 100 gained 1.4%. Cyclicals gained 0.8%; transports 0.4%; consumers 0.2%; as utilities declined 0.3%. Banks rose 2%; broker/dealers 1.4%; as high tech fell 1%; semis fell 0.8%; Internets 0.3% and biotechs 1.6%. Gold bullion fell $60.00 the HUI gold index fell 3.4% and the USDX rose 1.3%.

Two-year T-bills fell 3 bps to 0.27%, the 10-year t-note was little changed at 2.97% and the 10-year German bund fell 8 bps to 1.80%.

The Freddie Mac 30-year fixed rate mortgage rate fell 5 bps to 3.90%; the 15’s fell 2 bps to 3.17%; the one-year Arms fell 1 bps to 2.72% and the 30-year fixed fell 5 bps to 4.67%.

Fed credit declined $9.2 billion to $2.908 trillion, up 15.5% yoy. Fed foreign holdings of Treasureis and Agency debt fell $2.3 billion to $3.460 trillion. Custody holdings for central banks rose $75 billion yoy or 2.2%.

Money market assets fell $13.1 billion to $2.652 trillion.

Total commercial paper fell $10.4 billion to $927 billion, off 12.8% yoy.


            Goldman Sachs Group Inc. lost money in Asia last year for the first time since 2008 as the Wall Street firm’s stock investments in the region, led by a holding in China’s biggest bank, backfired.

A 46 percent decline in Asia revenue compared with 2010 was driven by markdowns on the company’s stakes in public equities, the firm disclosed in its annual 10-K filing with the U.S. Securities and Exchange Commission. The bank lost $103 million in the region, compared with a $2.08 billion profit a year earlier, according to the New York-based company.

            The figures illustrate how losses in Goldman Sachs’s Investing & Lending unit, which makes so-called principal investments with the company’s own money, can surpass the bank’s revenue from working with clients. Goldman Sachs bankers in Asia won first place among equity underwriters and takeover advisers last year, according to data compiled by Bloomberg.

“Last year was the perfect storm for Goldman in Asia as it was a brutal year for equities in the region,” said Sandy Mehta, chief executive officer of Hong Kong-based Value Investment Principals Ltd.

            He said he expects a rebound this year: “The markets have gone up, so their equity positions would have rebounded strongly.”

            Orders to U.S. factories decreased in January for the first time in three months, a sign manufacturing is cooling at the beginning of the year.

            Bookings fell 1 percent after a revised 1.4 percent gain in December that was larger than previously estimated, figures from the Commerce Department showed today in Washington. The median of 61 economists’ projections in a Bloomberg News survey called for a 1.5 percent decline.

            Rising oil prices and the expiration of a tax credit at the end of 2011 that supported business investment represent a risk to American manufacturers. At the same time, the need to rebuild inventories and replace outdated equipment may help keep factories at the forefront of the economic expansion.


Never before have the world's central banks sent so much money sloshing through the global financial system

Over the past 3½ years, the central banks of the United States, Britain, Japan and the 17 countries that use the euro have pumped out so much money that their balance sheets have reached a combined $8.76 trillion. That's a record, by far…

Critics counter that the flood of cash has made high inflation more likely. And they point to rising prices for oil, food, gold and other commodities as evidence. They warn that the easy money may allow investors to bid stock prices up to dangerous heights.

They also note that the crisis led central banks to accept high-risk investments that banks have wanted

to unload. These investments have been collateral for money that central banks gave financial institutions. Trouble is, the central banks must eventually unload the trillions in assets on their books…


The ISM Non-manufacturing hit 57.3 in February; 56.0 was expected. The employment component was the only component that declined.

How can US factory orders decline 1% in January when the Chicago PMI and other PMIs were so good?

Different models for seasonal adjusting produce great fiction, my dear Watson.

Inventories increased 0.6% from a year ago to $614.7 billion, according to a Commerce Department monthly report. Both inventories of manufactured and non-manufactured goods rose, by 0.6%...

Dallas Fed President Fisher: I am personally perplexed by the continued preoccupation, bordering upon fetish, that Wall Street exhibits regarding the potential for further monetary accommodation—the socalled QE3, or third round of quantitative easing. The Federal Reserve has over $1.6 trillion of U.S. Treasury securities and almost $848 billion in mortgage-backed securities on its balance sheet. When we purchased those securities, we injected money into the system. Most of that money and more has accumulated on the sidelines: More than $1.5 trillion in excess reserves sit on deposit at the 12 Federal Reserve banks, including the Dallas Fed, for which we pay private banks a measly 25 basis points in interest. A copious amount is being harbored by nondepository financial institutions, and another $2 trillion is sitting in the cash coffers of nonfinancial businesses.

Trillions of dollars are lying fallow, not being employed in the real economy. Yet financial market operators keep looking and hoping for more. Why? I think it may be because they have become hooked on the monetary morphine we provided when we performed massive reconstructive surgery, rescuing the economy from the Financial Panic of 2008–09, and then kept the medication in the financial bloodstream to ensure recovery. I personally see no need to administer additional doses unless the patient goes into postoperative decline. I would suggest to you that, if the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage…

Fisher also slammed Obama and the US Congress: Now hold on to your seats: Mexico actually has a federal budget! We haven’t had one for almost three years. Furthermore, the Mexican Congress has imposed a balanced-budget rule and the discipline to go with it, so that even with the deviation from balance allowed under emergencies, Mexico ran a budget deficit of only 2.5 percent in 2011, compared with 8.7 percent in the U.S. Mexico’s national debt totals 27 percent of GDP; in the U.S., the debt-to-GDP ratio computed on a comparable basis was 99 percent in 2011 and is projected to be 106 percent in 2012…