Bob Chapman | April 11, 2009
For those of you too young to remember, the World Bank and the IMF were creatures of John Maynard Keynes, and then assistant Treasury Secretary Harry Dexter White. They, the IMF and the World Bank, have competed with commercial banks as an instrument of elitist policy, as an adjunct to one-world policy.
This has brought us a legacy of socialism and fascism as today’s Treasury Secretary calls for a trebling of lending power for the IMF. The IMF has been a failure and up to recently had very few loans outstanding, which dramatically cut its income. As a result, Rodrigo Rato resigned and French socialist Dominique Strauss Kahn took over. At the World Bank Paul Wolfowitz paid off his lover with an undeserved higher salary and he was kicked out in favor of ex-Goldman official Robert Zoellick. This entire group has something in common and that is they are all members of the Illuminati.
From an elitist viewpoint the current world financial crisis has given both institutions a new undeserved lease on life. Their raising of funds and the demands from Treasury Departments worldwide has been crowding out businesses in world money markets, at the same time banks have been cutting out lending. We see no end in sight for this ongoing problem. Almost every country has a budget deficit that has to somehow be funded.
Presently the IMF has about $50 billion deployed and wants $500 billion more, of which $250 billion has been committed from the printing presses of major nations. Of the $50 billion only about $19 billion has been lent out. Even Ukraine, in a state of financial and economic chaos has only drawn $4.5 billion of a $16 billion line of credit. The reason is the conditions of the loan are particularly onerous. That is because of a pending election in which the Illuminist candidate might otherwise be defeated destroying all the hard work of the CIA and George Soros. The challenger, Julia Tymoshenko, is pro-Russian. That is not unusual in a country with a large Russian population. For those who missed their geography lesson Ukraine borders on Russia. The other big loans are $15.5 billion to Hungary, $7.5 billion to Pakistan and $2.3 billion to Belarus. In addition they have lent $2.2 billion to Latvia and $2.1 billion to Iceland. That is more than 90% of last year’s commitment. Countries have to be desperate to take IMF funds. They are like dictators and their demands are unreasonable. That is why all the South American countries paid off their debt and threw the IMF out.
The next logical question is when will the IMF have to lend to Greece, Ireland, Spain, Italy, the UK and perhaps even to the US?
England has, via the Bank of England, already bought about $150 billion worth of British Treasury paper. Annualized that is $600 billion a year. At that rate they would be printing money faster than Weimar Germany. Japan, England and the US are all buying their own Treasuries. They are monetizing creating high inflation and have fiscal deficits of more than 10% of GDP. Those deficits will be even larger next year and for years to come.
Just as bad is that nation’s are increasing money and credit at an average of 14% with no end in sight and they’ve been doing that now for 4-1/2 to 5 years. You can see inflation is of no consequence to these people. They will never have tight monetary policy, nor will they ever reign in these excesses, because if they do, the system will collapse into deflationary depression. That is why owning gold and silver is so important.
The same economists who want to be accepted, or are concerned about their jobs, keep on telling us we are in recession and we will bottom out this summer. These are the same professionals that couldn’t call a recession until the government made it official, a year after it began. Some economists now talk about restrictive monetary policy, which should have been discussed five years ago. Few will speak out because they are captives of the system. They have a vested interest in lying. This is not only in economics and finance; it permeates our whole society.
The Dow is going to 4,000 or so whether Wall Street, banking and government like it or not. Our question is will we be lucky enough for it to stay at 4,000? We do not believe it will. We will know better in time.
The latest beauty from the Illuminists is that the FDIC will be given $500 billion from the Treasury instead of banks joining government insurance programs. The public gets to pay again. The FDIC will provide non-recourse loans – loans secured only by the value of the toxic mortgage assets being bought for $0.85 on the dollar, when their real value will be $0.10 to $0.30 on the dollar -banking debt that the American taxpayer will be allowed to pay for. You know the program; we explained it previously. We can’t even find out who is getting the money. It is a state secret that would affect our sovereignty and it would put a stigma on the recipients.
Wait until US Treasury yields rise and everyone tries to exit this “safe” asset at the same time. There will be pandemonium and gold will go crazy.
The economy sunk 6.3% in the 4th quarter and we see the same results in the first quarter. In the second half of the year we see minus 3% to 4% and for the first three quarters of 2010 the GDP will be even. The economy will continue to deteriorate and unemployment will grow. In 2010 we will see GDP fall to a minus 10% and from then on out it is anyone’s guess what will happen. Why do you think the government’s preparing for revolution?
Americans are cutting back on debt creation as lenders cut back on lending. They are saving again. Americans are not going to borrow and spend as they have in the past, at least not for now. They won’t until the depression is behind them. Washington and Wall Street’s dream of back to business as usual is deeply flawed. As saving and not spending as much takes place that will put further pressure on the Treasury market forcing greater monetization by the Fed. That will put further pressure on the economy throwing it deeper into depression.
As we predicted earlier this year, the US 10-year Treasury, then at 2.70% should trade up to a 3.50% yield before the end of the year. This is the only way the Treasury can hope to attract foreign investors, particularly the Chinese and Asians.
China is not only doing currency swaps, but South America’s, Bank of the South, will be in action next month with $10 billion in start-up capital. This will lessen the need for dollars.
At a recent meeting in Toronto, Nouriel Roubini said he saw no growth for two years. Half of the hedge funds will go bust next year.
Meredith Whitney said, “To get out of the problem break up the market share of the five big lenders.” You will see credit ripped out of people’s wallets. Ten million more will lose homes. There are $4.2 trillion in credit cards outstanding. If you cut credit it is a pay cut. That is bearish.
Credit card companies shut down eight million credit card accounts in February. Banks have already closed out 80 million cards.
As we predicted the Treasury says that life insurers will be able to use TARP.
As we forecast in January and February the largest state and municipal pension plans lost 9% of their value or $2 trillion. That followed 30% losses in 2008 of $900 billion. These retirement funds are about 50% funded. These funds have no safety net. Wait until you see what happens to all retirement funds, life insurance and annuities when the Dow falls from 8,000 to 4,000.
Treasury Secretary Timothy Geithner is catching all kinds of flack for his stress test - a backdoor way of giving away money. The NY Post described it as a test like an open book, take-home exam, that doesn’t actually work. The FDIC’s Sheila Bair says it is a pointless exercise that has more sizzle than steak. It is a sham.
The latest on the IMF gold sale is the rumor that the Chinese want to take down the entire 403.3 tons, if sale is approved, at a 10% to 20% premium. That figures, because they want to dump dollars. That would be only a 1% increase in reserves. Total IMF reserves are only 5% of China’s currency reserves. By way of comparison the US, Germany, France and Italy have 60% to 75% of reserves in gold. Russia has 4% of gold in reserve. Thus, Russia is a competitor for any IMF gold sales. Even if approved there is no chance any of the IMF gold will hit the market.
On Wednesday, spot gold rose $2.60 to $884.60, as the outside month traded $3.70 lower. Spot silver rose $0.12 to $12.33 and it traded $0.07 lower in the outside month. The XAU fell .59 to 123.34 and the HUI rose .77 to 296.99. As you know gold traded up to $891 early on. Gold open interest rose 1,653 contracts, as silver OI fell 802 to 93,101. Tocom increased gold shorts by 7 to 17,624 and in silver increased net shorts by 11 to 345.
On Monday the ETF GLD holdings were unchanged at 1,127 tons. The ECB reports that one central bank sold 0.63 tons worth 14 million euros. Deliveries have taken the registered category in silver down from 80 million ounces in December to 63 million. It could be that SLV is getting silver from the Comex out of HSBC warehouses. That means SLV is short silver probably because they cannot buy and get delivery, so with slight of hand they borrow it. This could prove explosive as silver rises sharply or if major other deliveries take place. The paper market is a disaster waiting to happen.
The Dow was off 10 with 8 minutes to go and it performed another miracle by finishing up 47 to 7837, as the S&P rose 78 and Nasdaq rose 174 Dow points. The 2-year yielded 0.92%; the 10’s 2.84%; 1-month Libor 0.46% and 3-month 1.14%. The FOMC meeting produced little. The merger of Centex and Pulte Homes is akin to a shotgun wedding. Rick Santelli, the only announcer on CNBC with any guts said, “The IMF is now in the Roubini camp” with regards to their estimate of losses.
On Wednesday, the Central Fund of Canada completed a stock offering for $200 million. It increased gold and silver holdings and shares outstanding by about 13%, to about 1.2 million ounces of gold; 59 million ounces of silver; 185 million shares outstanding, or a market cap of about $2 billion. CEF is 60% gold and 40% silver. This reflects the exploding demand for physical gold and silver.
Wednesday HSBC shut down three call centers – New York, Chicago and Virginia.
Barclays asset management business iShares has a $5 billion bid from Hellman & Friedman fronting for Carlyle Group and Apax Partners and a bid of $6 billion by Goldman Sachs. They are also in talks with CVC Capital Partners. The bids are for different sections of the company. Barclays will retain its securities lending unit, which lends out shares to shorts such as hedge funds. This shows you how profitable and massive the short selling is by the largest banks.
The yen rose .0076 to $.9968; the euro fell .0023 to $1.3231; the pound fell .0042 to $1.4682; the Swiss franc fell .0038 to $1.1486; the Canadian dollar fell .0002 to $.8081 and the dollar index fell .12 to 85.17.
Oil fell $0.97 to $50.12; gas was unchanged at $1.46 and natural gas rose $0.09 to $3.65. Copper rose $0.01 to $2.00; platinum rose $12.60 to $1,180 and palladium rose $0.30 to $233. The CRB rose .81 to 223.71.
Early Thursday was aimless. The Dow was up 63 at 7856; S&P rose 56; Nasdaq 17 and the FTSE 20 Dow points. The Nikkei rose 321; the CAC rose 16 and the DAX rose 49. The yen fell .0041; the euro rose .0028 and the pound fell .0004. the 2-year was 0.93% and the 10’s 3.88%. Oil rose $1.65; gas rose $0.03 and natural gas rose $0.01. Gold fell $0.07 to $886.60; silver fell $0.05 to $12.29 and copper rose $0.05 to $2.04.
Propaganda makes the stock market a very strange place. In desperation Pulte Homes, one of our short recommendations, merged with Centex staving off bankruptcy for another couple of years. On this news the stock market rallied. It clearly illustrates how screwed up Wall Street’s values truly are. Wall Street obviously is more concerned at being in the rally than about the possibility of losing money. This merger was an act of desperation not a powerful new move. This is how excess capacity is worked off. Next we’ll find out that they qualify for TARP, or some other taxpayer largess.
Saints preserve us: Our Treasury Department, also known as Goldman Sachs south, wants the American public to again come to the aid of the banks. Via the Treasury and the Fed they are already on the hook for $12.8 trillion.
The Obamaites are encouraging several large investment companies to create the financial-crisis equivalent of war bonds - bailout funds. These funds would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. There is a perverse twist to this, and that is, that there is a deep political motivation as well. It is to quiet accusations that all of these giant bailouts will benefit only Wall Street elitists. The political risks for the administration are considerable. As Nobel Prize winner Joe Stiglitz says, “The bailouts merely privatize profits and socialize losses.” Needless to say, these big firms and investment managers will charge healthy fees to investors for taking part.
Quicker than you can snap your fingers the IMF is about to create $250 billion in SDR’s.
We do not believe the smoke and mirrors earnings of Wells Fargo. It doesn’t pass the smell test. It is a complete fraud. They are hiding losses under mark-to-model.
Market fundamentals continue to deteriorate as the trailing six month P/E on the S&P 500 passed 100 times earnings. If you are not out of the market you had better be.
GE Capital is hiding $45 billion in embedded losses in the GE Capital portfolio. If this had to be written off today it would wipe the company out.
Wal-Mart’s comparable-store sales in March rose 1.4% in the 5-week’s ending 4/3. Nordstrom‘s same-store sales fell 13.5%; Dillards 19%; Saks 23.6%; Kohls 4.3%; JCPenny 7.2%; the GAP 8% and Abercrombie & Fitch 34%.
For the week ended 4/8 the US commercial paper market rose $56.9 billion, the biggest rise since early January, to $1.533 trillion. Asset-backed commercial paper rose $3.5 billion after a drop of $1.1 billion the previous week. Asset-backed CP rose $704.5 billion, up about $4 billion. Unsecured financial issuance rose $40.9 billion after a drop of $9.3 billion the previous week.
S&P has downgraded all major mortgage insurers.
The congressional oversight panel says the government may spend more than $4 trillion as the economy faces prolonged weakness.
Some believe the US dollar is dead and the Chinese yuan will be the global reserve alternative within 12 months. This bears out our opinion that SDRs are a short-term crossover solution. We should have several global reserve currencies within a year.
Reports are reaching us that the so-called stress test may be put on the back burner, which probably means the results will be disastrous. If this is so, you will see another suppression of bad news. There will probably be an announcement a couple of hours after the close on Friday that the stress test will be done at a later date. Some idiotic excuse will be given. We cannot let the public know that all the banks are insolvent. This is called lying by omission.
We see some analysts telling us the financials are a good buy. How can they make such statements when they do not have all the information? There is deliberate obstruction, propaganda and mark-to-market. The latter values can be whatever the bank wants them to be. We said the same thing about Fannie Mae and Freddie Mac five years ago when we recommended a short position at $68. No one believed us. Inside Washington everyone knew they were insolvent, but no one would break silence. The analysts keep on recommending the stocks without any due diligence.
Needless to say, just as in the case of Madoff, they refused to find anything wrong with mountains of evidence of wrongdoing. That means the SEC was in on the scams – all of them. No one with fiduciary responsibility, such as an economist, analyst, or the SEC cannot make any kind of a recommendation without first getting a full accounting of what is held on a balance sheet. Today you are looking at truly opaque derivatives contracts that one didn’t have to deal with 20 years ago. That in mind, it is almost impossible to put a value on what these banks, brokerage houses and other funds are worth. It is all a scam and all of Wall Street, the SEC and Congress know this. This is the same situation faced in naked shorting. It is so bad that the SEC doesn’t know how to handle it. All the big firms have broken all the rules, blatantly and the problem is so severe that, if the SEC tried to solve it, there would be major bankruptcies. As usual, as with the stress test, the bad news is kept out of sight and fades into oblivion.