International Forecaster Weekly

States And Citizens Alike Under Crushing Financial Stress

Greece stonewalls against law changes, Ireland issues to come, France VAT rise, debt per American is growning, Europe demands more liquidity, after SOPA and PIPA, more efforts to impose censorship and control over the internet, states and people running out of cash.

Bob Chapman | February 8, 2012

There are many ways for sovereigns to sell their bonds or roll over existing bonds, and one of those wrinkles we mentioned last week. We saw European banks buying US Treasuries and that is happening. These euro banks buy Treasuries and then put them up for collateral with the ECB and purchase the three-year 1% yield repos being offered by the ECB. This is really another form of quantitative easing. It may be debt but it is also an expansion of the money supply. This little game allows US Treasury financing and if something goes wrong the ECB, the public, gets caught holding the bag. Obviously this is another part of the Ponzi scheme that the elitists are using to keep the monetary system afloat.

The idea that Germany wants Greece to give up control of tax and spending decisions has met a stonewall in Greece, as one would expect. That is like financial occupation, what the Greeks went through in the 1940s. We do not think the German demands have a chance of acceptance and that $170 billion bailout will take place.

The Troika has proposed extra Greek spending cuts of 1% including health spending, defense and an additional 150,000 jobs over the next three years. The IMF has said such cuts will impair any recovery, so the question arises why do they want to keep on cutting when they know the economy will experience depression?
            The merger of the EFSF and the ESM is off as Germany parliamentarians refused approval. It was stopped by Volker Kauder, the floor leader for the CDU, Chancellor Merkel’s party. Mrs. Merkel is in serious political trouble.

Greek problems are on the forefront, but lurking in the wings is Ireland, where the government is under fierce pressure to hold a referendum on the euro zone fiscal treaty. A poll showed 75% of the public want a vote on the agreement.

Over in France, the French wild man, Mr. Sarkozy, wants to raise the VAT, the Value Added Tax from 19.6% to 21.2%. He has also unilaterally proposed a financial transact tax of 1% on French securities. Such a tax would drive stock and bond business from Paris to other markets.

As you can see Fed Chairman Ben Bernanke doesn’t like being totally frank. He failed to tell you how banks in Europe can bypass the normal course of borrowing by buying US Treasuries, making the Fed very happy and then using the Treasuries for collateral to get cheap loans from the ECB. This brings a new dimension to leveraging. It is diabolical and changes the funds available tremendously. There is far more money available in Europe than immediately meets the eye.

The Fed will keep Fed funds rates near zero thru 2014 and who knows perhaps forever. These unbelievably low interest rates guarantee few will be savers and retirees are going to be eating more cat food. They will not be marginal buyers we can assure you of that. At the same time these poor souls get nothing for their savings and they also have to contend with real inflation of more than 11% annually.

Long ago we predicted QE 3 by buying toxic bonds from the banks at secret prices when real markets do not really exist for such waste. What the numbers will be remains to be seen - perhaps $800 billion to $1.3 trillion. We tend toward the lower number, but we will see.

A month ago we were treated to a $1 trillion currency swap between the Fed and the ECB, which was in fact a loan, which is illegal for both entities. As you know the world elitists make up the rules as it suits them. Be as it may those funds can be leveraged to $10 trillion or more if the banks choose to do that. These economies are helped short-term but nothing is being done to solve the underlying problems. Adding debt to debt is no answer.

This plan was supposedly, as usual, coordinated with the Swiss National Bank, the Bank of Canada and the Bank of England for the direct benefit of the European Central Bank. There was one announcement and you haven’t heard hardly anything since. It is supposed to be a big secret. That is not surprising considering unlimited amounts of money and credit are being dumped into the system. The Anglo American establishment now owns Europe. The Fed now has an even larger monopoly.

These incredible amounts of money are being showered over the banking system as 1.1 million Americans have been added to the unemployment ranks over the past three years to total over 13 million. If you put all the numbers together it’s some 20 million. Debt per American is $48,700 and there are more than 46 million living in poverty – 46 million Americans live off of food stamps. As you can see the public is hanging on for deal life and investors don’t know which way to turn, because they do not understand gold and its function. If they don’t understand the function of gold and silver they’ll probably eventually lose 90% of their assets as most did in the 1930s. They are facing the greatest creation of fiat money in the history of mankind. America is no longer a bastion of capitalism or free markets. It is a corporate fascist state.

Bob Chapman - The Alex Jones Show - 03 Feb 2012

Bob Chapman - Real News Radio - Feb. 4, 2012

THE POWER HOUR – 02/06/12

Bob Chapman - Liberty Round Table - 06 Feb 2012

Bob Chapman - Financial Survival - Feb. 6, 2012

European bureaucrats are in a battle with banks on safe-asset holdings. They are being assisted by the ECB. More conservative collateral is being called for and the banks contend they cannot do that and thus they want the rules changed. Will the regulators relax the rules? Of course they will. There will be new exceptions and definitions and the banks will do as they please. If the rule is not changed from 9% reserves back lower, some banks could be in serious trouble and we couldn’t have that could we?

Just to show you banks in Europe have already received more than $3 trillion in additional liquidity and now they want $1 trillion more.

In the meantime, over at the ECB under Mario Draghi, super Illuminist; the ECB has secretly supporting the euro, while over in Switzerland the SNB is intervening in the market to cheapen their currency. Both operations are very expensive. The simple thing for the Swiss to do is tax SF deposits by 1% as they did in the 1970s.

This past week both Greek unions and employers’ associations rejected private sector wage cuts. Greek wages are double those of their travel competitors, because Greece uses the euro, which prices them out of the market. As you can see solidarity reins and nothing is going to change that, until the April election is over.

Negotiations are still ongoing respecting Greek private debt, which is a waste of time.

The Greek government, who’s appointed president is an Illuminist, has demanded minimum wage cuts, further salary cuts and the elimination of 150,000 jobs. Isn’t it great when your president works for the enemy?

In late March Greece faces a $19 billion bond redemption, which we see means nothing at all. You cannot get blood out of a stone. They’ll just have to wait just like everyone else. Negotiations are in progress. Thus far private investors would take real losses of more than 70% through a 50% cut in the face value of the bonds, along with lower interest rates and a 30-year payment period. Unless the ECB and national central banks join the deal we see no deal. Why are they different than any other creditor? Even with all the cuts that have been made by the Greeks they still cannot meet targets in their original bailout agreement of May 2010 of $14.5 billion. Is it any wonder 30% of stores in Athens are shuttered and people are leaving the country in droves?

Over the next two months Greece will probably default and that will cause CDS, credit default, to have to pay off and the question is do the banks in NYC have the funds to do so, and will their counterparties come through and pay off on their bets? If they cannot fulfill their obligations the whole derivative market could collapse. These banks own the Fed, so they will be bailed out again. How much probably $70 billion. Is that a lot in today’s world? No, not at all when just six weeks ago the Fed lent, via currency swaps, $1 trillion to the ECB.


Last week the Dow rose 1.6%, as S&P gained 2.2%. Nasdaq rose 2.7% and the Russell 2000 leaped 4%. Banks rose 5.1%; broker/dealers 5.5%; cyclicals 3.5%; transports 0.5%; high tech rose 4.3%; semis 3.5%; the Internet 3.6%; biotechs 6.1%; consumers 1.2% and utilities 0.3%. Gold bullion fell $13.00, the HUI god index fell 1.3% and the USDX was relatively unchanged.

Two-year T-bills gained 2 bps to 0.23%, the 10-year T-note yields rose 4 bps to 1.93%, and the German 10-year bunds gave small ground.

The Freddie Mac 30-year fixed mortgage rates fell 11 bps to 3.87%; the 15’s fell 10 bps to 3.14%. One-year ARMs rose 2 bps to 2.76% and 30-year fixed jumbos fell 14 bps to 4.60%.

There was little change in Fed credit. Fed holdings of Treasury, Agency debt rose $3.7 billion to $3.410 trillion. Custody holdings rose $54 billion year-on-year, or by 1.6%.

M2, narrow, money supply rose $4.5 billion to a record $9.768 trillion.

Total money market assets fell $21.3 billion to $2.657 trillion.

Total commercial paper outstanding rose $800 million to $972.2 billion.

            The structures for new European banking capital requirements by the banks are not credible. Under fire are the ways banks calculate the risk-weighing of their assets an pledges of asset sales, that are unlikely to attract buyers. Again, banking estimates are far from reality.


Senate Majority Leader Harry Reid, following a recent anti-piracy legislative debacle with SOPA and PIPA, will lead his second effort of 2012 to push Internet-regulating legislation, this time in the form of a new cybersecurity bill. The expected bill is the latest attempt by the Democrats to broadly expand the authority of executive branch agencies over the Internet.

Details about the bill remain shrouded in secrecy. Clues available to the public suggest that the bill might be stronger than President Barack Obama’s cybersecurity proposal, which was released in May 2011. Reid said that he would bring the bill — expected to come out of the Senate Homeland Security and Government Affairs Committee, chaired by Connecticut independent Sen. Joe Lieberman — to the floor during the first Senate work period of 2012.

A classified meeting behind closed doors in October 2011 between key Senate committee leaders with jurisdiction over cybersecurity and White House officials, took place at the request of the Obama administration. Lieberman, in an interview with The Hill in October, said that past Senate cybersecurity bills were considerably stronger than the White House proposal.

The White House proposal recommended that the Department of Homeland Security be given broad regulatory authority for cybersecurity matters over civilian networks. The White House proposal also recommends that the DHS program be “developed in consultation with privacy and civil liberties experts and with the approval of the Attorney General.”

A recent bill in the House  – the Promoting and Enhancing Cybersecurity and Information Sharing Effectiveness Act of 2011 or PrECISE Act — also empowers DHS in the event of a cyberattack, but the bill has been criticized by Reid as not giving the agency enough power. PrECISE focuses on strengthening the information sharing component between private corporations and DHS by allowing a limited amount of information to be shared between the two.

Reid favors an approach that would expand DHS authority beyond currently regulated “critical infrastructure,” such as utilities and financial institutions, to also include Internet service providers and private networks.  

“Lieberman said the turf war over which agency should be in charge of implementing the government’s cybersecurity plan has been largely resolved and there is a ‘broad consensus’ that DHS is best suited to the task, with technical and intelligence support from the military and National Security Agency,” reported The Hill.

Paul Rosenzweig, a visiting fellow at The Heritage Foundation, recently concluded that the NSA “does it better than DHS” when it comes to cybersecurity. Rosenzweig, who crafted policy inside of DHS, noted that the preference should be for a civilian agency to oversee a predominately civilian network, but it lacks the manpower to handle that responsibility. DHS recently announced a decision to hire 1,000 new cyber experts.

“But until these new experts are on board (and finding and hiring that many will be a long process), civilian defenses will have to rely on existing expertise that lies predominantly with NSA,” said Rosenzweig.

The NSA, at present, already works closely with financial institutions to battle hackers.

Reid sent a letter to Senate Minority Leader Mitch McConnell in November, which urged the need to act for fear of a major cyber attack, regardless of whether legislative working groups that have been working on this issue come to an agreement. McConnell replied with a letter of his own, advising Reid to introduce legislation that would have bipartisan support.

“Everyone wants to improve cybersecurity, but, if we’ve learned nothing else from previous legislation affecting the Internet, we know that an imposition of an overly broad regulatory regime of the Internet ecosystem will not sit well with the American people,” a Senate aide told The Daily Caller.

JPMorgan Chase & Co., the biggest U.S. bank by assets, reached a preliminary agreement to pay $110 million to settle litigation saying it gouged customers on overdraft fees for checking accounts, court records show.

            The settlement would resolve claims by customers including Andrea Luquetta of Los Angeles, who sued over fees charged to debit cards attached to her checking account. U.S. District Judge James Lawrence King in Miami must approve any settlement. King had earlier rejected arguments by various banks that customers were legally bound to arbitrate the dispute.

“We’re pleased to have reached an agreement in principle,” Patrick Linehan, a JPMorgan spokesman, said in an e-mailed statement.

            The litigation before King involves more than 30 banks sued over their overdraft-fee policies. The customers say the banks reorder debit-card transactions in their computers to maximize overdraft fees. Bank of America Corp., the second-biggest U.S. bank by assets, agreed last year to pay $410 million without admitting liability to settle an overdraft lawsuit brought by its customers.

            In her lawsuit, filed in 2009, Luquetta claimed JPMorgan engaged in “unfair, deceptive and unconscionable” assessment and collection of overdraft fees. Her complaint also refers to the practices of Washington Mutual Inc., which JPMorgan bought in 2008.


Job openings in the U.S. increased in December by the most in almost a year, showing employers are gaining confidence the economy will keep growing in 2012.

The number of positions waiting to be filled climbed by 258,000, the biggest gain since February 2011, to 3.38 million, the Labor Department said today in Washington. Excluding government agencies, openings at private employers climbed to the highest level since August 2008.


The use of lower-rated debt in a key US funding market has returned to pre-crisis levels, fuelling fears that the so-called shadow banking system is becoming riskier.  The repo market is an important part of the shadow banking sector, which consists of unregulated financial institutions and activities…  When the US housing bubble burst, the banks’ trading partners refused to accept such securities as collateral and the repo market rapidly contracted.  However, a study by Fitch Ratings says the proportion of bundled debt being used as security in repo transactions has returned to pre-crisis levels…  ‘These are less liquid, longer-tenor assets that are funded short-term by highly risk-averse lenders,’ said Robert Grossman, head of macro credit research at Fitch. ‘In a period of market turbulence, all of the parties to a repo would be affected,’ he added, meaning that both banks and funds could be hit.


Terry Williams borrowed about $7,000 to earn a degree from Spelman College 38 years ago. For her youngest child, a sophomore at Belmont University in Nashville, she will take on almost $40,000 in parental loans.  Williams… is watching her retirement savings dwindle as she pays college bills for her three children… ‘I’ll probably work until I fall dead at my keyboard,’ the Decatur, Georgia, resident said… It’s not just graduates who are staggering under the weight of educational loans. Parents, too, are borrowing record amounts to put their kids through college, jeopardizing their retirements. With the housing crisis, many families can no longer avail themselves of one popular option for financing university studies: taking out a second mortgage.


The aging of America may be good for the U.S. labor market.  A growing number of older people and rising health-care spending are driving demand for workers from nursing aides to surgeons. While the economy lost 7.5 million positions during the recession, health care expanded staff. Together with social assistance, it will add 4 million employees to become the second-biggest job gainer by 2018, behind only professional and business-services… Manufacturing is projected to lose 1.2 million jobs by then.  Health care… was the largest contributor to employment growth in the past two years, with a 22% share that was almost twice as big as manufacturing.


California is running out of cash, the state controller warned in a letter to lawmakers… Controller John Chiang said lawmakers need to scrape together $3.3 billion by March assuming the state's financial situation doesn't get any worse…  He urged the state to delay some payments, borrow more money and shift cash among various funds.  The looming problem is the result of another difficult budget year. Chiang said the state, as of Dec. 31, has spent $2.6 billion more than expected while collecting $2.6 billion less in revenue.”