International Forecaster Weekly

Stock Markets on a Seesaw

GDP charitably recalculated, dollar still jumping around on USDX, the Euro effect, central banks generate artificial liquidity, McCain chooses running mate foolishly, foolish meddling in Russian affairs in Georgia, economies crippled by war spending

Bob Chapman | August 30, 2008

Well, it's in.  It is now official.  Q2 GDP was 3.3%.  And if you believe that, we will be happy to sell you that bridge in Brooklyn that we have for perpetual sale to the incredibly gullible and naive.  This structural icon is a magnificent piece of US Americana and infrastructure that everyone should own.  It can be yours for a cool million bucks, which is a bargain considering the tolls you could impose.  And never mind that we already sold it to the people who believed the NIST's report on Building 7 of the former World Trade Center.  As you know, it is perfectly OK to sell property you don't own.  If you don't believe us, then ask all the bullion banks who sell the gold and silver they have leased from central banks and precious metals ETF's.  The real figure for GDP is of course negative.  To be charitable, let's call it minus 1%.  The reason for the ludicrously higher GDP figure, aside from the bogus government accounting practices, which are used to calculate official GDP, is that the official GDP deflator is about one third of actual.  That results directly from the fact that official inflation is one third of the actual inflation you experience when you purchase goods and services.              That way our corporatist, fascist government can rip off retirees on their social security benefits and give people an excuse to remain in denial about the destruction of our economy via hyper-stagflation.  Note that GDP was negative despite a 160 billion dollar stimulus package, which stimulated nothing, and despite substantially increased US exports due to the weakness of the dollar.  Yes, it is that bad, and it is going to get a lot worse.

            The dollar continues to bounce around between 76 and 77.5 on the USDX, as the PPT continues to put on a show for the benefit of the incumbent scum while the reprobates and sociopaths, who pass themselves off as our political leaders, cause us to puke with their corn-ball theatrical performances at the Jackass and Dumbo Follies, which some dare to call political conventions.  Aside from direct collusion and intervention by central banks, dollar support has resulted from several "cutesy" moves.              When the SEC decided to enforce the law against naked-shorting, albeit only for the "Magnificent 19," this caused a huge short-squeeze that put many hedge funds under water.  The troubled funds were forced to bail themselves out, and that meant selling their winners in long oil contracts, which in turn collapsed the price of oil.  This sharp drop in oil prices then wiped out a huge hedge fund that was long oil big-time, causing oil prices to collapse even further.  Dollars had to be purchased to acquire the liquidated oil contracts, thus supporting the dollar, and these dollar proceeds were then used to pay down margins at big commercial and investment banks, which then used the margin-covering funds to purchase treasuries not only to make a return, but also to absorb the dollars that had been flushed out by the collapse in oil prices.  

            The henchmen in the repo pool must have doing a lot of overtime. The resulting move into treasuries drove treasury rates down, and supported the prices of treasuries, which are a huge portion of fraudster balance sheets.  In the aftermath, petrodollars were drained from the system by virtue of the resulting lower oil prices.             

Since most petrodollars are converted to euros by OPEC nations who prefer to shop in Europe instead of in the US, this put pressure on the euro and supported the dollar.  This is what is called the "euro effect" because it drains huge amounts of liquidity from the Euro Zone, which the ECB has to then counteract by pumping out money and credit at a substantially increased pace.  Also, the bank failures, worldwide recession and the Fannie/Freddie debacle are scaring foreign and domestic investors alike into the perceived safety of treasuries, which means that foreign paper assets are being sold and the foreign currencies received as proceeds are being used to buy dollars, which are the only form of payment acceptable for treasuries, thus further supporting the dollar.  This flight to safety ties in with the continual and incessant de-leveraging that remains ongoing in a vain attempt by Wall Street fraudsters to restore capital ratios, and this de-leveraging is making it impossible for the PPT to sustain any stock market rallies.  That is why the stock markets are going up and down like a seesaw, bobbing and weaving like a drunken sailor.  Banks can no longer buy and hold.  They have to take profits off the table as soon as they are earned, or even more pathetically, sell when their losses are reduced by the PPT orchestrated up-ticks in the stock markets.  That is how desperate they are.  All this dollar strength then ignites a short-squeeze on those who are short the dollar, thus creating yet more support for the dollar.  The problem is, the dollar can only be pushed so far before the short-covering expires and the dollar continues its downward trend based on the fundamentals.
            The Illuminati can forget "The Big Sting Two."  Their perpetual fraud and deceit have caused the killer credit-crunch, thereby destroying bank balance sheets and their ability to make profits, and now they are forced to de-leverage, because they cannot generate new capital.  To be sure, there are no profits left for stock buy-backs.  Worse yet, no one wants to buy their debt or their equities anymore, because all the pros know they are insolvent, and declining equity prices, and increasing interest rates on debts due to increased risk and hyperinflation, are exacerbating that problem by forcing greater degrees of equity dilution, and/or of the cost to service debt, whenever the fraudsters come to the Illuminist capital troughs to feed and water themselves.              The same goes for GSE's Fannie and Freddie.  Speculation is now out of the question.  The system is about to collapse.  Within the next two to three months we will see the nationalization of Fannie and Freddie and a major bank failure, perhaps the largest on record that could wipe out the entire reserves of the FDIC.  As this transpires, the precious metals enter their seasonal strength while war in the Balkans looms with ever-increasing tensions.  Iran is also perceived as a potential trouble area.  These various dire circumstances will be supportive of precious metals and oil, which are going to head much higher.  We do not think the elitists can hold the system together through the elections in November.  The problems are accelerating, both in frequency and in severity.

            All the recent manipulated dollar support has wilted the precious metals during their slow season.  The SEC only enforces laws against naked-shorting, and then only for flagship Illuminist firms, when it serves some sort of nefarious purpose, like forcing liquidations of precious metals and oil to cover short-squeeze losses from hedge funds covering their shorts on the "Magnificent 19."  Or should we call them the "Maleficent 19."  The latter is certainly more appropriate.  Nevertheless, gold and silver have staged a comeback, and the cartel had a collective myocardial infarction as December gold futures threatened 850 on Thursday.  Hence, the strong manipulated yen on Friday to subdue investment in precious metals by the carry traders and the stock market pounding that was also the end result of the yen-hit on precious metals.  We have also noted yet another favorite cartel trick that has been demonstrated by the PPT's latest yen machinations.  The recent strength shown by the yen against the euro, which has greatly declined by virtue of dollar strength, has the effect of subduing investment in precious metals in the Euro Zone where gold and silver are rapidly appreciating against the euro.  Hence, the yen carry trade is used as a counterbalance against the precious metals when they threaten to increase against currencies that are depreciating against the dollar.

            There is no net deflation.  WE REPEAT.  There is no net deflation.  Yes, there is deflation on account of collapsing real estate, stock market and derivative values, as well as lower oil prices which are draining petrodollars from the system, but all these declines in liquidity are being more than offset by the Fed and the ECB who are pumping out the money and credit at an ever-increasing pace to grease the system and keep it from collapsing.  They do this by creating money out of thin air, through monetization of debt.  Soon M3, which is still in the 16% to 18% range, will have to be ratcheted up to 20% and beyond as declining natural liquidity generated by normal business function is replaced by artificial liquidity generated by the central banks to fill in the gaps caused by a systemic collapse in business function.  That is what the half a trillion each of monthly Fed and ECB largesse is all about, and it is immediately inflationary.  This will send gold and silver to the moon.  Any commentaries suggesting that deflation is taking over are totally false, and these doltish comments result either from total stupidity about how M3 is calculated or from the intentional dissemination of elitist disinformation intended to hit precious metals or to justify Fed rate cuts.  The Fed is not going to raise rates.  If anything, it is going to be forced to lower its rates.  Nevertheless, the markets will impose higher rates to compensate for increased risk and rapidly increasing hyper-stagflation which is destroying real rates of return, thus rendering the Fed, and the ECB, totally irrelevant.  We are going down big-time.  It is not "if," but "when."

            John McCain, Manchurian Candidate and Bush Clone, has picked a pro-life Christian for his vice presidential running mate.  Sarah Palin, the current governor of Alaska, is a high-risk, high-reward choice, who will appeal to the Christian right but who is inexperienced like Obama.  If you are going to have inexperience, however, we suppose it would be better when applied to a vice president, who does little more than collect dust in a back office in the White House, although certainly experience is not necessarily a good thing, because it implies entrenched greed and corruption in the Washington setting.  What we find really interesting is that due to McCain's age and poor health, if elected, the neophyte governor from Alaska could end up being President Palin, a pro-life Christian.  Now wouldn't that make the Illuminati's blood boil?  Hey, we can dream, can't we?  Ron Paul is a better choice, however.  With him you get both honesty and several decades of experience, plus he is also a pro-life Christian, making him the obvious choice for anyone claiming to be a Christian, or for anyone who wants honest, informed, government conducted in accordance with the US Constitution which the current Administration has unceremoniously disdained and destroyed after taking an oath to uphold it.

            Mark Twain once said:  "Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it."  Perhaps he had a premonition of today's situation in Georgia when he made that statement.  Could our government and the Illuminist's possibly be this stupid, or are they attempting to implement an intelligent agenda that we don't yet see?  So far, we can only see the former.  However, is it possible that they are in the process of "cunningly" pushing us into the next world war, and could care less if thousands of Georgians and South Ossetians, together with a few hundred US and Israel mercenaries, are slaughtered in the process, while European oil and gas supplies are compromised?  Well,  if that is their plan, then this is total madness.  This will not solve the economic catastrophe as it did during WWII.  In fact, it will only make matters worse, and instead of drawing our attention away from the economic problems, it may well draw everyone's attention directly to those problems.  We have a service economy now, not a wartime manufacturing economy like we did in WWII.  How will our service economy and its much-reduced domestic military-industrial complex bring us out of our current economic debacle through a world war?  We are already in debt up to our ears, and unlike WWII, which put us into debt, a new world war could take us beyond debt into revolution and destruction, to follow in the footsteps of the fallen Roman Empire.  If we try to destabilize Russia and China, we are the ones who could end up being destabilized.  Russia and China are net creditors, while we are the greatest debtor nation in the history of the world.  Our military is reduced to a fragment of our WWII strength, and our soldiers are worn out and pushed beyond their limits, while our equipment deteriorates and we can ill afford to replace it.  Are we going to institute a draft to make up for the deficit of soldiers, and to replace exorbitantly expensive mercenaries?  It takes time to grow an army, and in the meanwhile what is left of our current army could get wiped out.  This is not a low technology war of rifles, tanks and bombs, like WWII, and even a rogue state can do devastating damage with WMD's, which, thanks to the evil, traitorous Bush and Clinton Administrations, are now in the hands of many nations that are very hostile to US interests.  Do they seriously think they can survive a nuclear conflict, which is the likely outcome of their current imbecilic moves?  We know they want to wipe most of us out, but do these would-be lords of the universe really think that they themselves can survive?  And don't forget, WWII came 12 years after the Great Depression of the 1930's that commenced with the Stock Market Crash of 1929.  Our economy has already been destroyed, and is now headed for depression following the hyper-stagflationary recession which is currently under way, but there has been no breather to set ourselves up to prepare for war on a worldwide scale.  We live in a completely different world from the one that existed in the 1940's, and now WMD's can wipe out millions in a fraction of a second.  We are commencing a headlong plunge into worldwide death and destruction from a position of weakness instead of a position of strength, and our moral underpinnings for these conflicts are nonexistent.  These people are raving psychopaths, and if the US public does not stop them, billions are going to die!