International Forecaster Weekly

IMF Predicts Growth

IMF predicts growth, CDO failures, losses of over 1.3 trillion dollars, IMF's predictions of swirling seas of money, dumped by China and other asian powers, Karl Rove revelations of election fraud, was the Ohio election rigged? Measuring the dow in gold, and a Weimar Republic for America

Bob Chapman | May 5, 2007

The IMF believes they have the world economy all figured it out after 4 years of 4.9% growth in the years 2003 to 2006. They believe we will see another 2 years of the same. The last time this happen was in 1970 to 1973 when growth was 5.4%. 1974-75 had growth rates of 2.3%, which include a sharp recession. There has never been a six year 4.9% increase since 1970; someone should remind the IMF that growth was 2.5% in the fourth quarter of 2006 and 1.7% in the first quarter. On average that is border line recession, recession being 2% or lower for 3 continues months. In the early 1970s the Fed and others were not increasing money supply by 14% a year for over 3 years nor was the UK, Australia and Europe. The IMF anticipates the strongest growth in 35 years plus 2 additional years. This would be unprecedented and might happen. If it does the aftermath would be a humdinger.

The IMF seems to have discounted the results of the housing recession, and its effect on financial markets and the economy.

Already bonds of CDOs are being revalued by credit organizations and we see dozens of downgrades on CDO’s failures. This has, and will continue to spread to ALT-A paper, fixed mortgages and junk bonds. It is only a matter of time before it reaches quality issues, overall short and long term US Treasury rates have been and continue to move higher. Pushed upward by foreign interest rates and a weakening dollar, the housing market is facing overall losses of 1.3 trillion dollars and that is not chump change.

Due to the sea of money swirling around the world doesn’t mean the next 2 years couldn’t slide by in a light recession, but as we and Carlyle Corp. said last week the longer this correction is put off the worse it is going to be. It must be understood that the 4.9% growth is expected to come from Asia and the developing world. The IMF sees the US gaining 2% in 2007 and 2.2% in 2008, still recessionary conditions. They believe at least for 2 years the sea of money will carry the world economy. What happens after that is problematic. We see US GDP growing at 1% to 2% over those 2 years. Recession and prolongation only make the ensuing years far more difficult. We are already in a consumer pullback. People are house (asset) dependent, income-short, overly-indebted, without savings and there won’t be a source of expansion. As the US declines so will the rest of the world. As we said before, the key is for how long and for how much will commercial, business and speculator interest continue to assume the wild risk they are assuming. The US and the US dollar is the key. The internationalist had everything interconnected. That is great when everything is going fine. It also feeds on itself in a down spiral as well. As we have said before American’s only salvation is tariffs on good and services. It is the only way we can keep companies and jobs in the United States. We have to charge the currency manipulators, subsidizers and unfair traders to do business in America, otherwise we are doomed. We cannot become a total service society. Wealth has always comes from production, technology and innovation.

We project that by the yearend a currency and trade bill will pass Congress veto proof and it will become law. How extensive it will be remains to be seen. It will be a start. That will lessen if not destroy the dominating effects of WTO, NAFTA, and CAFTA.

The first step is to kill the presidential fast track. The bill will be far more stringent on China than others. China will sell dollars adding to the pressure on the world reserve currency, but they know they can’t dump dollars, because they will take 30 to 50% loses. That’s the percentage that the currency is undervalued. China should have been dollar sellers in an orderly fashion the past 6 years, but they will not and now no matter what transpires they will be losers. That will cut back on exports to the US, disrupt China and cause higher US inflation.

In America and eventually throughout the world there will not be containment of these problems. Control is now, in part, out of the hands of central banks and in the hands of speculators.

Once they substantiality cut back their risk taking the game will be over, and a year to 1-1/2 after that deflation and depression will take hold. Globalization and free trade will come crashing down in a heap. 

We are being told by experts that the Bee die-off is being cause by genetically modified crops that produce pesticides. Insecticide is in the plants including the pollen. The Bees eating the pollen are dying because of weakened immune systems, and that could eventually happen to humans as well. This contagion will as well affect animals. Those creating this monstrous problem, such has Monsanto could care less. They want to control the world food supply. It is all about money and Illuminists’ power. Only this time they as well as we are affected by this health hazard and many people will die by debilitating illnesses. This Franken food madness has to be stop now.

In a new scandal, in the city of a scandal a day, senior Justice Department official, Deputy Chief of Staff for the criminal division, Robert E. Coughlin II, who oversaw the department’s probe of Jack Abramoff, was a longtime friend and a key associate of Abramoff. Coughlin has resigned and is headed for Texas to be protected by the Bush crime family. Can you see what kind of selective enforcement we have in Washington? Abramoff gives up a few Congressmen and gets a few years only to be pardoned by outgoing President Bush. Abramoff should have gotten 15 years.

This scandal can be added to the ongoing attorney purge investigations in process and their political implications. Now Coughlin is under investigation. Corruption flourishes in our nation’s capital.

It looks like e-mails from Karl Rove’s computers, and secret revelations about critical electronic conflicts of interest, may be the smoking guns of Ohio’s stolen 2004 election. A thorough recount of ballots and electronic files, preserved by a federal lawsuit could tell the tale. There is a large batch of electronic communications that have disappeared from the server of the Republican National Committee. Yes, we know the dog ate them. The attention stems from the controversial firing of eight federal prosecutors by AG Alberto Gonzales, known as the big purge. This could be the smoking gun of the 2008 elections. It is believed that computerized vote tallies were shifted in the Ohio vote count from John Kerry to George Bush, giving Bush the presidency.

The time in question was a late night period after the presidential election. Earlier that day Rove and Bush flew into Columbus and met with Ohio Secretary of State J. Kenneth Blackwell and Matt Damschroder, executive director of the Franklin County (Columbus) Board of Directors. These four, along with Ohio GOP Chairman Bob Bennett, were at the core of a multi-pronged strategy that gave Bush Ohio’s 20 Electoral College Votes, and thus, the presidency. Bennett and Damschroder held key positions on election boards in the state’s two most populous counties, with the biggest inner city concentrations of Democratic voters. Rather than go through all the details, we may know in the next few months whether the Ohio election and the presidency were rigged.

The Bush government is doing another great job rebuilding Iraq. A federal Oversight Agency has found in sampling eight projects that the neocons declared successful, seven were no longer operating due to plumbing and electrical failures, lack of proper maintenance, apparent looting and expensive equipment that lay idle. Some were abandoned in just the past six months at the cost and loss of hundreds of millions of dollars. The projects were all over Iraq. They were maternity hospitals, barracks for an Iraqi Special Forces unit, and a power station. At the hospital the expensive incinerator for medical waste was locked and as a result the waste including syringes, used bandages and empty drug vials, were clogging the sewer system and contaminating the water system. Of $11.8 million of generators only $8.6 million were functioning. The new water purification system does not function. There has been $30 billion spent on such projects. In all it has been a nightmare.

The Dow may have crossed 13,000 on a sea of money, but we didn’t find it a remarkable achievement, at least not for those who understand the real value of real money. In 2000, at the top of the stock market, an important juncture the Dow’s price equaled about 43 ounces of gold. Today it is worth only 19 ounces. In 1929, at the top of the Dow, the Dow equaled 19 ounces of gold. As you can see from 2000 until now the Dow has really gone nowhere in spite of manipulation and the biggest overall expansion of money and credit in history. The Dow is at best treading water. In euro terms, the dollar net buys 30% less and we believe over the next few years it will buy 30% to 50% less. It buys 65% less silver, 70% less oil, 80% less copper and 90% less uranium. We can thank Sir Alan Greenspan and the Fed for this tragic result. It could be we are headed for another Weimar Republic that great creation of fiat paper Reichmarks in Germany, which was the result of Germany’s defeat in WWI and the reparations it was forced to pay to the allies, which eventually brought Hitler to power.

Today America is in a similar dilemma running two simultaneous wars and spending more than it makes. That is why foreigners have to spend $2.1 billion a day to buy US assets so we do not go bankrupt. Anyone with a clear understanding of monetary history knows this cannot continue indefinitely.