International Forecaster Weekly

Injured Global Economy Ponders Coming Challenges

No understanding of debt repayment, banks and Euro zone nations broke, Fed opens swap floodgates, nations on the edge of default await aid, recapitalization, European plunge into recession is underway, quantitative easing the cause of inflation, 40 million on food stamps in the US, Ron Paul the best choice still, Greece to tip Europe over the edge.

Bob Chapman | December 21, 2011

Debt repayment is a subject few want to discuss, or that few understand. We know most of the largest banks in the world are broke along with at least 6-euro zone nations. There are many others, but the most concerning are the debts of major nations, which are supposedly solvent. Needless to say the US is deeply indebted and the Super-Congress Enabling Committee couldn’t even lay politics aside to cut spending increases.

A bill has been entered into Congress to prohibit US funds being used via the IMF to bail out European banks and governments. We see a scant chance of passage because of the elitist control of both Houses. On the other hand it makes little difference, because the Fed has opened the swap floodgates and other avenues of secret funding to “recapitalize,” bailout, European banks of all sizes and depths of default.

As we end 2011 it is all quiet on the Western Front. Behind the scenes unbeknownst to almost all the elitists are plotting and planning on how to extricate themselves from the morass they have gotten themselves into. How do they put the crisis on the back burner and extend the timeline? The vaunted 6 nations on the edge of default await aid, but one might ask from whom? That solution hasn’t even been sorted out as yet, and we now find France facing a possible two level lowering of debt ratings, but even Germany is not as solvent as they were thought to be. Could it be that France and Germany might not be able to repay their debts? Now you can understand why the money machine, known as the Fed, says nothing about their bailout of Europe. 95% of the population of the world doesn’t even know what a swap is. Even if they did understand they are never going to get the truth from the Fed. We saw that in court and GAO revelations recently.

The European Central Bank, ECB, does not have the Fed’s ability to continue to create money and credit. That means that the taxpayers in each nation must foot the bill, unless the Fed prints money for them. Thus, we see a central bank, which really is not a central bank. Germany is still not allowing the ECB to emulate the Bank of England and Federal Reserve. Germans still vividly remember the Weimar Republic and the resultant rise of National Socialism and Adolph Hitler. Even if such possibilities do not exist today they still see rampant inflation as a result of endless funding. Northern Europeans, in spite of participating in the EU and the euro zone, understand the frailties and cultural differences of their neighbors in the south. Europe has pursed the wrong path for more than two years. There simply isn’t anyway to bail out the six. They have to allow them to default and leave the euro.

The short-term cost is $6 trillion just to go sideways for a year or two. After that the underlying problem will still exist, and it will be worse. Professionals in part recognize the problems and as a result interest rates have risen and the entire European system is under pressure, including their stock markets. We know that “The President’s Working Group on Financial Markets” has been active in markets worldwide, but because it is secret, we do no know the extent of market manipulation in keeping world markets up when they should be down. When Ron Paul becomes President of the United States and the reign of the bankers ends we will then be able to see what these criminals have been up too. A good part of the world is headed into recession and depression. Europe’s plunge into recession is underway and that condition is just going to exacerbate the situation. What we have is a European standoff and the possibility that Germany may go its own way, becomes more plausible with every passing day.

They could leave the euro, let the six nations go under and take their losses and leave the EU as well. Remember, Germany overwhelmingly did not want either but were forced into the situation or order to regain Western Germany. The cost of that effort was outrageous. They were forced to exchange a Deutschmark for a Reich mark, one-for-one. It should be between 30 to 1. Germany is sick and tired of getting the short end of the stick and we believe 65% or more of the German people want out and that may very well happen though few see that possibility. The recent exchange with the British over City of London taxation could well have been a ruse to expedite the German exit from the euro and the EU. This is why we are always thinking outside the box.

In order to circumvent the rules the elitists have formed and funded a new bailout program via the IMF, something the IMF was not created for. That is to bail out Europe. Bailing out singular nations is one thing, but bailing out a whole continent is another. What we should say is the job of the IMF was and is to bailing out countries, so they can pay the interest on their debt to keep the banks solvent.

The big ultimate question is, who will bail out the US? The answer is no one and that is why ultimately there will be a meeting of all nations, which will revalue and devalue all currencies against one another and have a multinational default and debt settlement. That means everyone gets to pay some of the losses, except of course those who own gold and silver related assets. All the elitists know that they can monetize money and credit only for so long before hyperinflation takes place. Thus, there will be an end game.

We will never know whether several weeks ago the German bond auction was for real. Did the government only sell half its bond auction or was it a ruse? From a logical point of view it was a disaster, but everything is not always the way it seems to be. If it were bona fide it would have been an effort to try to force Germany into quantitative easing.

There is no question that the creation of money and credit known as QE has been instrumental in the monetization of debt that has then caused inflation. Professionals and investors are fortunately catching on, but they have no clue how bad this really is and is going to be.

Students of economic history, whether Keynesian or Austrian, knows there is no way of avoiding the collapse of an unlimited credit expansion. The only solution is abandonment of the expansion of money and credit and a purging of the excesses of malinvestment in the system. As we have pointed out regularly over time the elitists who control the world-banking establishment are not going to let that happen if they can help it. They control most governments and as a results most militaries. That is why internment camps have been set up across America to incarcerate Americans as terrorists who disagree with government or more nearly disagree with the elitists. It is a fact that military that are completing their tours are being offered placement at FEMA camps, TSA and other secret operations. Blackwater professionals are now as well being offered positions as well. The internment of average American citizens without charges, who may never be seen again, tortured and murdered on orders from our President will go into action in just two weeks. Our Senators and House representatives voted these conditions for you two weeks ago, overwhelmingly. Needless to say, the yes votes should be thrown out of office. This is the sad state we have come to as we predicted in the early 1960s.

The Illuminists who are attempting to implement world government are not without greed and they push the Keynesian system by creating ever-larger amounts of money and credit that they can profit from. That we have seen for years and today it is totally manifest in the US and world economies. This extension of money and credit allows these malefactors to stay in power and to control our lives by dictatorial power and internment, torture and death if necessary. In addition, the system of taxation, which drains off almost half the profits of industry and individuals, goes into non-production, but more importantly into the hands of politicians, who are directly controlled by elitists, who then use those funds to control the masses.

This game has been going on for centuries, but most citizens wouldn’t know it, because they know little or nothing of history, including many writers We are again in this condition because few wanted to pay attention or were uninterested because they were uninterested or took their freedom and liberty for granted. Those in power know the public will act when it is too late. They will become concerned but never enough to implement real austerity. The public wants to feel no pain, so they demand more money printing taking the easy way out. Keynesianism is a giant corporate fascist welfare system where those at the top continually loot those at the middle and bottom. We have some 40 million people on food stamps.

What does that tell you? The system cannot now function without government handouts. The same is true of Medicaid and extended unemployment and many other government programs. When these programs are ended and they will be ended, people will be totally dependent on government and will do whatever they are told to do. It is time for citizens of America, Britain and Europe to wake up and take your governments back. Doesn’t the setting up of internment camps and staffing them tell you something? All you have to do is open your mouth and off you go to the slammer. Your President is dancing you around with the same promises you heard three years ago. When are Americans going to smarten up? The first victims of internment will be Muslims. Then after the November elections they’ll concentrate on those who are outspoken and militia types. Then they’ll come after us, and other writers and communicators.

The only way we can legally stop these criminals is to elect Ron Paul president and those that think the way he does and understand the problems. If you do not do that we are all doomed. There will be no way back except via revolution and you don’t want to experience that.

In preparation each family should have dehydrated and freeze-dried food, a water filter and a method of protecting their families. All of their residual funds for investment should be in gold and silver shares, coins and bullion. The percentages depend on what is suitable for you. Remember, that with each passing day your dollar or your currency buys less and less. These are long-term investments so treat them as such. Governments and those who control them, bankers, are trying to relieve you of your last penny and at the same time render you dependent. The only way you can preserve your wealth is via gold and silver related assets.

What observers seem to miss is that the leverage in US banks, some 8,100, is about 13 to one. That includes the major banks, which are about 40 to one. In Europe the overall leverage is 25 to 1, which is dangerous territory, because a drop of 4% in asset values will dissipate their total capita. Generally speaking debt as a percentage of GDP for financial institutions in Europe is more than 100 to one and close to 148% to one. These numbers are outrageous and demonstrate how vulnerable the entire financial structure of Europe really is. There is more debt than GDP.

The catalyst to tip Europe over the edge is probably going to be Greece once they have an election and default. In the meantime French, Irish, German, Spanish and Italian banks have to roll over 1/3rd to ½ of their debt. This is going to be a staggering refunding considering Germany could not recently sell half of its Treasury bonds. 2012 will be very eventful, as 8 major European countries have to roll 19% of their entire debt on average. These numbers do not include unfunded liabilities. European countries cannot raise this kind of money and so we expect to see perhaps as many as six countries leave the euro, and the euro zone just may be history. In fact in chain reaction all Europe could financially collapse. For those of you who do not know it, China is Europe’s biggest trading partners and the US accounts for 21% of its exports with Europe. If this happens, and it probably will, the economies of Europe, China and the US will be in freefall.

As we predicted when the euro was $1.38 we said it could easily fall to $1.18 and then to one to one. We could see higher interest rates, lower sovereign ratings for France and maybe even Germany. We could easily see the euros value back at 199 levels. There is not only tremendous stress on the financial system, but also on the physical economies. The disease is not being treated. In addition, interest rates are rising and that presents a whole new set of problems.

Bob Chapman - Erskine Overnight - December 17, 2011

James Corbett

Interview 437 – Bob Chapman

Bob Chapman - Discount Gold & Silver Trading - 19 Dec 2011

Bob Chapman joins Wide Awake Radio 12-19-11


Last week the Dow fell 2.6%; S&P 2.8%, the Russell 2000 fell 3.1% and the Nasdaq 100 fell 3.5%. Cyclicals fell 4.9%; transports 1%; consumers 1%; utilities fell 0.2%; banks 3.6%; broker/dealers fell 64%. High tech fell 5.2%; semis 6.1%; Internets 4.3% and biotechs fell 2.6%. Gold bullion fell $113.00 and the HUI gold index fell 9.1%. The USDX rose 2.1% to 80.26.

Two-year T-bills were unchanged and the 10-year notes fell 21 bps to 1.85%. German 10-year bunds fell 30 bps to 1.85%.

The Freddie Mac 30-year fixed rate mortgage rates fell 5 bps to 3.94%, the 15’s fell 6 bps to 3.21%, the 10-year ARM’s rose 1 bps to 2.81% and the 30-year fixed jumbos fell 1 bps to 4.69%.

Fed credit surged $69.2 billion to a record $2.867 trillion. Year-to-date that is up 20.2%.

M2, narrow, money supply rose $19.1 billion to $9,640 trillion, that is 9.7% ytd.

Fed foreign holdings of Treasury, Agency debt fell $12.3 billion to $3.434 trillion. Custody holdings for foreign central banks rose $92.3 billion ytd and $105.6 billion yoy.

Money fund assets were unchanged at $2.678 trillion.

Total commercial paper declined $5.6 billion to $992 billion, which is up $20 billion ytd and $10 billion yoy.


            Jon Corzine, MF Global Holdings Ltd.’s former chief executive officer, is the defendant in nine lawsuits before a federal judge in Manhattan that are seeking compensation for losses from the company’s collapse.

            The plaintiffs, including an electricians’ union, allege that Corzine and other company officials made misleading statements about MF Global’s financial condition before its Oct. 31 collapse. U.S. District Judge Victor Marrero has been combining the cases into one, saying they make similar claims about similar facts and events, and he now has consolidated nine of them, according to a court filing today.

Andrew Levander, a lawyer for Corzine, didn’t immediately respond to an e-mail seeking comment on the suits, which are seeking class-action, or group, status.

Corzine, the former governor of New Jersey, and senior MF Global officers touted the company’s internal financial controls and liquidity levels in statements that were “materially misleading or untrue,” according to a Nov. 3 complaint filed in Manhattan federal court by Joseph DeAngelis on behalf of himself and other MF Global shareholders.

DeAngelis also named Henri Steenkamp, the New York-based company’s chief financial officer, and Bradley Abelow, its president.

‘Power and Influence’

“Defendants had the power and influence -- and exercised such power and influence -- as to cause MF Global to engage in the unlawful conduct and practices,” DeAngelis alleged. “Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of MF Global common stock.”

MF Global filed for bankruptcy listing $41 billion in assets after making bets on European sovereign debt and getting margin calls. The holding company is the parent of a futures brokerage that is being liquidated in a separate court proceeding.

An Oct. 25 release on second-quarter results “falsely stated” that MF Global had strengthened its capital and liquidity, according to the suit.

Corzine said in the release he was confident the company had “the resources and expertise to continue to successfully manage these exposures,” according to the suit.

Corzine and MF Global also have been sued by former employees and commodity customers. A trustee liquidating the MF Global Inc. brokerage is looking for $1.2 billion or more in money missing from commodity customers’ accounts. Corzine has said he doesn’t know where the missing money is.

The main case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).


Housing starts and building permits jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting the housing market was entering a tentative recovery.

Tuesday's data, which also showed gains in groundbreaking for single-family homes, was the latest sign of a quickening of growth that should help the nation weather tighter fiscal policy at home and a slowing global economy.

"Investors should take heart that if Europe doesn't melt down and Congress figures out how to extend the payroll tax cut, the economy can continue to gain momentum," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Housing starts surged 9.3 percent to a seasonally adjusted annual rate of 685,000 units, the highest level since April last year, the Commerce Department said. Economists had forecast a 635,000-unit rate.

New permits for future construction increased 5.7 percent to a 681,000-unit pace in November, also well above expectations.

Stocks on Wall Street climbed sharply on the housing data and a drop in Spain's borrowing costs, with major indexes up nearly 2.5 percent in morning trade. U.S. Treasury debt prices fell as investors' risk appetite increased, while the dollar was weak across the board.

The U.S. economy is showing resilience even as much of the rest of the world is slowing down, with a festering debt crisis in Europe expected to push the region into recession.

There was some positive news for the embattled euro zone on Tuesday as data showed German business sentiment rose for a second straight month in December.


U.S. home prices will continue to decline through late 2012 or early 2013 as negative equity and weak job growth hinder a real estate recovery, according to a survey by Zillow Inc.

After 2013, prices may rise about 3 percent a year through 2016, which is slightly below appreciation rates experienced before the residential market collapsed, Seattle-based Zillow said in a statement today. The real estate data provider surveyed more than 100 economists, property experts and investment and market strategists.

The survey is based on the projected path of the S&P/Case- Shiller U.S. National Home Price Index over the next five years. Home prices have fallen 31 percent from a July 2006 peak through September, based on a Case-Shiller index of values in 20 U.S. cities.

“There is a consensus among the nation’s top housing experts that we have not yet reached a bottom and are instead working through a prolonged bottoming process,” Stan Humphries, Zillow’s chief economist, said in the statement. “Negative equity, unemployment and low consumer confidence remain the key factors delaying a true recovery.”


Damien Bombell left JPMorgan Chase & Co. (JPM) a year ago after the largest and most profitable U.S. bank shut its group trading commodities for the company’s own account. Now chief investment officer of his own hedge fund, he’s hiring four people before accepting money from investors next month.

“I can’t say there’s anything I miss about banking,” said Bombell, who turned 40 last week and plans to have at least $200 million under management at the Strand Global Macro Fund in Zug, Switzerland. “I have more freedom.”

Traders in energy, metals and agriculture are opening or joining hedge funds after leaving financial firms that cut more than 233,000 jobs this year, data compiled by Bloomberg show. Departures of commodity traders from banks probably rose 10 percent this year, according to Commodity Search Partners Ltd., a Brighton, England-based recruiter. Pay for that group will drop 24 percent on average, estimates Options Group, a New York- based recruitment firm.


A new poll from Public Policy Polling shows that Ron Paul has taken the lead in the Iowa caucus race, while Newt Gingrich’s support is fading fast. A different Gallup poll shows Gringrich still holding the lead, but slipping, while The New York Times has Paul in the lead as well.

Gingrich has seen his numbers in the PPP poll drop from 27 percent to 14 percent in just three weeks, while his favorability rating is now split at 46 percent for to 47 percent against, the worst of any candidate not named Jon Huntsman.

Perhaps the most telling secondary question was, “Do you think Newt Gingrich has strong principles?” Only 36 percent say that he does, but for Paul that number was 73 percent.


50 Economic Numbers About The US That Are "Almost Too Crazy To Believe"

#1 A staggering 48 percent of all Americans are either considered to be "low income" or are living in poverty.

#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be "low income" or impoverished.

#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.

#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million. [Yet the BLS has increased B/B jobs] #15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent #24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row. [Is it transitory, Ben?]

#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.


The Carolina Journal, published by the Raleigh-based John Locke Foundation reports that staffers in North Carolina Governor Beverly Perdue’s office have been getting advance word on monthly unemployment statistics from the U.S. Department of Labor’s Bureau of Labor Statistics. This is highly illegal under federal law and violates what I have understood to be a strong tradition in the BLS and other government statistics that no one, no one at all, not even in the White House gets advanced word ahead of the public announcement of government statistics.


New York City may face increased budget deficits because of falling Wall Street profits, an ‘uncertain economic recovery’ and the prospect of reduced federal and state aid, state Comptroller Thomas DiNapoli said.  The securities industry lost almost $3 billion in the third quarter of 2011, reducing year-to-date profits to $9.6 billion… He predicted profits will fall ‘significantly short’ of the $20 billion the city forecast for 2011 in its financial plan.  ‘With its prospects dimming, the industry has begun to cut costs and reduce employment and employee compensation, actions which will ripple through the New York City economy,’ DiNapoli’s office said… ‘Cash bonuses paid to securities-industry employees in the city are likely to be substantially smaller than last year.


            The nine-year-old Iraq war came to an official end on Thursday, but paying for it will continue for decades until U.S. taxpayers have shelled out an estimated $4 trillion. Over a 50-year period, that comes to $80 billion annually.

            Ceremony marks end of Iraq war.

The flag is lowered Thursday in Baghdad at a ceremony to mark the closure of U.S. military headquarters and the end of the war in Iraq.

            Although that only represents about 1% of nation’s gross domestic product, it’s more than half of the national budget deficit. It’s also roughly equal to what the U.S. spends on the Department of Justice, Homeland Security and the Environmental Protection Agency combined each year.

            Near the start of the war, the U.S. Defense Department estimated it would cost $50 billion to $80 billion. White House economic adviser Lawrence Lindsey was dismissed in 2002 after suggesting the price of invading and occupying Iraq could reach $200 billion.

            “The direct costs for the war were about $800 billion, but the indirect costs, the costs you can’t easily see, that payoff will outlast you and me,” said Lawrence Korb, a senior fellow at American Progress, a Washington, D.C. think tank, and a former assistant secretary of defense under Ronald Reagan.

            Those costs include interest payments on the billions borrowed to fund the war; the cost of maintaining military bases in Kuwait, Qatar and Bahrain to defend Iraq or reoccupy the country if the Baghdad government unravels; and the expense of using private security contractors to protect U.S. property in the country and to train Iraqi forces.

            Caring for veterans, more than 2 million of them, could alone reach $1 trillion, according to Paul Rieckhoff, executive director of the Iraq and Afghanistan Veterans of America, in Congressional testimony in July.

            Other experts said that was too conservative and anticipate twice that amount. The advance in medical technology has helped more soldiers survive battlefield injuries, but followup care can often last a lifetime and be costly.

            More than 32,000 soldiers were wounded in Iraq, according to the U.S. Department of Defense. Add in Afghanistan and that number jumps to 47,000.

            Altogether, the wars in Iraq and Afghanistan could cost the U.S. between $4 trillion and $6 trillion, more than half of which would be due to the fighting in Iraq, said Neta Crawford, a political science professor at Brown University.

            Her numbers, which are backed by similar studies at Columbia and Harvard universities, estimate the U.S. has already spent $2 trillion on the wars after including debt interest and the higher cost of veterans’ disabilities.

            The annual budget for the Department of Veterans Affairs has more than doubled since 2003 to a requested $132.2 billion for fiscal 2012. That amount is expected to rise sharply over the next four decades as lingering health problems for veterans become more serious as they grow older.

            Costs for Vietnam veterans did not peak until 30 or 40 years after the end of the war, according to Todd Harrison, a defense budget analyst with the Center for Strategic and Budgetary Assessments.

            “We will have a vast overhang in domestic costs for caring for the wounded and covering retirement expenditure of the war fighters,” said Loren Thompson, a policy expert with the Lexington Institute. “The U.S. will continue to incur major costs for decades to come.”