International Forecaster Weekly

Monetizing Wont Solve European Economic Affairs

European economic condition represents the lynchpin for the world economy, Euro sovereign debt crisis reigns, Greece riots, Germany weighs in on economic policy direction, costs moving higher for european nations, inflation a real fear, monetizing wont solve this problem.

Bob Chapman | November 23, 2011

We continue to write about Europe, because we have too. At the moment and for at least the next several months, it will be the lynchpin and the catalyst that could bring about a financial chain reaction worldwide. In turn Europe poses the biggest risk to the US economy. European direction has changed over the past few weeks to cut loose the six problem nations and any others who cannot stand on their own and reform a core euro zone. Presently Europe is nowhere close to ending its sovereign debt crisis. Germany does not want to use the European Central Bank as a lender of last resort. As riots erupt on the streets of Greece, talks are underway to structure 50% debt write-off that was the heart of the deal structured a month ago. In the meantime lending costs, already astronomical in Greece are relentlessly moving higher in Italy and Spain. The ECB has been active in the bond market as a buyer, but only in a limited way. The French, British and US want the ECB to act like the Federal Reserve overwhelming the market, and monetizing to solve the problems of the moment. The Germans do not want to deal with the inevitable inflation that follows. The extension of the problem, the hallmark of US, UK and French monetary policy obviously doesn’t solve the problem, but eventually compounds it by creating more debt and inflation. This policy has proven over and over again to be a failure in the longer term.

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Bob Chapman - The Financial Survival 18 Nov 2011

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Confusion still reigns in Europe, and as a result the euro has lost 3%. In fact, climbing interest rates have many panicked. Interest rates on the 2-year Italian bills rose 150 bps last week, or ½%, as CDS, Credit Default Swaps, jumped 24%. Yields on Spanish, French and Belgian bonds had the highest divergence in euro history versus the bund this past week as well. As we have pointed out over and over that there is only one safe haven and that is gold and silver related assets. We ask how can the US dollar be perceived as a safe haven as its debt grows exponentially and its credit rating is approaching another downgrading? There has been only one safe haven for 6,000 years and that is gold and if the US government thinks they are going to change that they are mistaken. The money managers and hedge funds continue to chase the same failing currencies and refuses to buy gold, which appreciated more than 20% annually along with silver for the past 12 years. What are these genius money managers thinking about? They are so cowed by the establishment and propaganda they do not dare deviate. That in the face of historically low yields, which when matched against inflation is dreadful. Doesn’t anyone think outside the box?

Bob Chapman joins Wide Awake Radio 11-21-11

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Bob Chapman - The Money & Wealth Show. - 11 Nov 2011