International Forecaster Weekly

The Road of Inflation Will Only End in Tears

Cycles of booms and busts are planned, unpayable debts in many nations, we predicted the demise of the bond market months ago, Ron Paul looks at bogus CPI and PPI stats, world problems affect us here, recent low for the US dollar, near misses at leaky nuclear plant at home at Indian Point, a brutal labor war being waged in Wisconsin.

Bob Chapman | March 23, 2011

Cycles and booms and busts just don’t happen. They are planned that way. In the late 1990s Fed Chairman Alan Greenspan commented on irrational exuberance and said he hoped the market would cool down. The amount of money and credit he had introduced into the system had a great deal to do with a forming of a bubble. He indicated that on the short-term there was little he could do about it, when all he had to do was raise margin requirements from 50% to 60% temporarily. We wrote about the solution as a coupe of other writers did, but no one really wanted to take away the dotcom punchbowl. In late March of 2000 the market began its collapse. We removed our subscribers out of the market in the first week of April, as did Joe Granville, a friend and one of the best market timers ever.

Sir Alan Greenspan spent almost 20 years serving his masters who own the Federal Reserve, JPMorgan Chase, Goldman Sachs, Citigroup and many more. The Fed has no independence – it takes orders from these banks and brokerage houses. This same group controls Congress by paying off 95% of the representatives and senators via campaign contributions and via lobbying. Thus, with the assistance of the Fed, Wall Street and banking, they not only control money, supply, credit, interest rates and Washington, but they control our entire economic and financial scene and the lives of every American. Booms and bubbles can be blamed on politicians, but the real culprits behind the scenes are Wall Street and banking in which we spent 29 years of our lives and for many of those years owned our own firm. If you do not know and understand these realities you should not be an investor or a financial and economic journalist. Our whole existence as a nation is controlled from behind the scenes by parsonages and groups most people have never heard of. All of what you see just didn’t happen; it was planned that way. People must understand that creating money out of thin air to fund astronomical deficits has to end in failure and ruin. We are now in an inflationary depression that will probably graduate into hyperinflation and then descend into a deflationary depression. This is what these elitists have done for centuries and have more often than not gotten away with it. This time it will be different.

We started warning people more than 50 years ago that the path America was taking could only end in tears. The days of inflation and social and political misery are finally upon us and as a result, so is social dislocation worldwide in the form of protest, demonstrations, civil wars and the overthrow of governments. We are not witnessing that in North Africa and the Middle East. This has been in reaction to dictatorial governments, low wages, high prices for food and few jobs. As we have said over and over again, revolutions begin with empty bellies. What you are seeing will not be limited to the third and second worlds, but to the first world as well. the elitists have again gone too far and the people of the world are reacting. This is only the beginning of dramatically higher food prices and perhaps oil and gas prices as well. Governments cannot help, nor can the elitists behind the scenes for all intents and purposes, saving the system is now out of their hands and what they have done has been discovered.

Most countries have followed the path of the US, UK and Europe, accumulating deficits many of which are unpayable. Essentially the world banking system is bankrupt. The Fed and the ECB buy debt and toxic debt as well as sovereign debt; the funds used for this purpose are created out of thin air. Sooner or later there will be a major worldwide meeting to revalue, devalue, and to multilaterally default. This can be the only solution to 40 years of profligacy and fiat currencies. The present cover-ups by central banks, Wall Street, banking and the City of London won’t last much longer. Unemployment worldwide and higher inflation are worsening and can only end in social and political dislocation. How can a government such as the US continue to spend in excess of 60% of revenues and expect others then the Fed to purchase their bonds? Spending has to be cut and taxes raised over a five year period. If that doesn’t happen and we get QE3 and more stimuli there will be ever more inflation and debt. Finally there will be financial collapse.

We do not in anyway relish having to tell you that the future will be very difficult. Financial dislocation will abound and in some of the countries in the third and second worlds there will be famine and death. As you know desperate people do desperate things and in June 2003, after the point of no return has passed, we predicted the events that unfortunately are being sensationalized today. Bringing the truth and facts to the people of the world is one thing, but trying to unnecessarily terrify people is another. All this should be presented in a calm, logical and rational manner.

As you know gold is up 15-1/4% annually, versus 9 major currencies over the past ten years. Over 11 years it has risen 83% versus the US dollar. Even the venerable Swiss franc is off 12.1% annually or 50%. The Dow has fallen 82% versus gold. The US economy has not only been mismanaged, but it has been gutted by massive criminal corruption. As the end of the world financial structure comes into view the scramble by the criminals on Wall Street and in banking accelerates, because they want to steal as much as they can before the collapse. That is why once the people have rescued their country from these criminals they should be tried, convicted, jailed or hung and all their assets that they have accumulated for themselves and their families should go to the federal government and the people. Heads will roll and we remind them because we know they read this publication, that you are conscious and alive for 15 to 30 seconds after your head is removed. This gives these criminals a final view of their headless corpuses.

We predicted the demise of the bond market months ago and that process began four-months ago. The 10-year US T-note rose from 2.20% to 3.74%, but with the demise of the stock market there has been what we consider a temporary rally to 3.23%. The downward pressure will continue. The Fed will continue to dominate the short end of the market, but not the long end. The fed will come under relentless pressure trying to affect the long end of the market and in that process squeeze the corporate demand out of the market. Investors should have been out of municipals three years ago and other bonds at least four months ago.

As we write Rep. Ron Paul is having hearings regarding the governments’ bogus CPI and PPI statistics. Hopefully the employment figures will follow. Inflation is now about 8% headed to 14% by the end of the year and perhaps much sooner. QE3 and more stimuli will take us to hyperinflation. Near zero interest rates and commodity shortages are adding to the upward move in inflation. The flip side is if there is no QE3 and stimulus, or if official interest rates rise, such as the ECB is talking about, the bottom will fall out of the economy. All currencies continue to lose value versus gold and silver, so except for operating expenses, you want to be out of all currencies and in gold and silver related assets. No matter what Larry Summers does in behalf of the elitists all currencies will devalue versus gold and silver. We see the future as absolutely inevitable.

We see all kinds of terrible things going on in the world, so many say, why are not gold and silver and shares moving higher? It is simple your government is manipulating them. That is the bad news. The good news is they cannot do it indefinitely. Hopefully, Rep. Ron Paul will bring legislation to bring an end to the Executive Order that allows “The President’s Working Group on Financial Markets” to exist, and return us to free markets and ends the basis for corporatist fascism.

We do not have to remind you of the ongoing problems in the aftermath of Japan’s earthquake and the problems that presents for the world.

There are further problems facing the Middle East as well. Even the mainline news admits as much.

In the US the states, as far as we know, haven’t solved their financial problems nor have the municipalities or the Federal Government for that matter. In the bond market, MBS municipal and investment grade corporate spreads are widening. There certainly has never been a dull moment as the world continues submerged in debt, and a good part of which is unpayable. The public and corporations either pay down the debt as countries inflate it away or monetize debt, which causes inflation and currency debasement. That is why currencies fall against other currencies and more importantly versus gold and silver. It has been shown historically that when a gold standard is used, inflation alternates with deflation that brings balance in markets even if the government inflates. The result is that over time prices stay about the same. Today we suffer from the result of leaving the gold standard. Once you do that all you get is inflation, the depreciation of a fiat currency and higher gold prices.

It should be noted here that problems in the Middle East, North Africa and in Japan should develop into deflation, but that will be superceded by more massive debt creation, at least that will temporarily keep the deflation monster at bay. The only country in this group that could fall to deflation quickly is Japan, which has been in depression since 1992. What the US and others have experienced for more than three years is a papering over of the monetary and fiscal excesses and creating future inflation liabilities, which are now coming home to roast. Paper money, or at least money with no gold backing, brings on inflation. As a result the spectra of hyperinflation is discussed. There are very few episodes over the years when the world sees hyperinflation. Since the mid-1700s only some 30 instances have occurred. Thus, we are careful to predict such an event until it becomes overwhelmingly evident that hyperinflation will occur. We are often asked when does hyperinflation happen and the answer is probably when inflation exceeds 50% and has the power to become inflation of thousands of percent. These kinds of numbers come as a result of monetizing a large percentage of government debt. That unfortunately has been in process for the past two years or more. We are also in the process where bad money drives out good, or real money such as gold and silver. Eventually gold and silver and selective currencies in turn drive out the bad currencies, which in turn collapse and become valueless. Hyperinflation destroys the value of all but a few currencies and, of course, all the while gold and silver advance in value versus the currencies. You will always hold the value of your wealth and protect it by owning gold and silver related assets.

Before we leave this issue we’d like to say a bit more regarding quantitative easing. We as you know are closing in on the tail end of QE2, and last May we predicted QE3, stimulus 3 and perhaps more behind. The largess heaped upon banks, Wall Street, insurance companies and selected transnational corporations has allowed them all to prosper, dispense fantastic bonuses and to destroy their competition, thereby making them bigger and more competitive and further too big to fail. Of course, the taxpayer paid for all this and received little or nothing in return. All QE2 did was temporarily bail out the government by creating money out of thin air, again at the expense of the average American. The result has been at least in professional circles, a serious loss of integrity in the Fed and its ability to deal with such situations. The dollar is getting pounded as a result and that will continue. Inflation will rage and gold and silver will rise ever higher. It is evident to thinking people that the US and the world monetary systems are insolvent. It is obvious that almost zero interest rates, quantitative easing and stimulus have to continue indefinitely or the bottom will fall out of the US and world economy. The dollar is doomed and if the Fed, and its owners the banks, are not stopped from doing what they are doing Americans and eventually the world will be enslaved in a total corporatist, fascist structure.

In the meantime malinvestment rages along with capital destruction. The problem is systemic and cannot be solved short of a purge of the entire system and that is definitely where this is all going to end up. Quantitative easing and stimulus have created an illusion of recovery. The situation in the Middle East, North Africa and Japan will be justification for QE3. All central banks can now do is print money.

On Friday the dollar hit another recent low at 75.65. It passed right through support at 76. That is because the message is finally getting through. That is that the US is bankrupt. While the dollar falls the Treasury Secretary is asking Congress for more debt. That is an indication of how desperate the elitist banks and brokerage houses are. There is no denial, this is how it’s been planned, and this is exactly what they expected. Normal logic does not apply. You have to understand what these people are up too, and why they are deliberately taking the economy and financial structure down. They have tried this time after time unsuccessfully. Only a handful of writers understand the operation, but eventually everyone will painfully discover what has been done to them.

Again, gold and silver related assets are the only assets that can protect your wealth and give you safety through the storm that we are embroiled in. Just look back 6000 years or for that matter for the past 11 years. If you understand history there is nothing surprising in that foreigners continue to buy Treasury and Agency bonds from an insolvent nation. The reason is that they are all in on taking down of the world economy. Like times before the elitists will again fail. The reason for owning gold and silver grow. Gold replaces the dollar, massive inflation is on the way, less than 2% of the public and institutions are involved, many nations are bankrupt and then the situation in N. Africa, the Middle East and Japan and looming food shortages. The elitist manipulation of the markets continues with less and less success. It is all paper. They have no physical for sale. In addition, more and more Comex contract holders are taking delivery, which has to stun JPM the big naked short in silver. Both silver and gold corrections have been shallow over and over again. We might mention that these crooks are being aided and abetted by the CFTC an the government. HSBC, the other big silver short, like JPM, is making it as difficult as possible to take possession of physical silver. Then, of course, there are the 50% to 80% bonuses not to take delivery.

Intervention by the G-7 manipulated the yen down .0266 to 80.71. They say this was the first such episode in ten years. If you believe that we have a bridge that should interest you. In spite of that the USDX fell to new lows. So much for a free market. The manipulation was done to remind players of the power of the G-7 and to save US and foreign banks from taking massive losses in the yen carry trade. Incidentally, market interference extends to hedge funds as well. Under the direction of the Fed, Treasury and the “Working Group on Financial Markets” they are also selling yen. This shows you how widespread the manipulation and corruption is.

Most writers believe that the elitists are confused as to why a recovery has not taken place. We refer you to the Bernanke-Boskin Paper in 1988 in which they point out that the actions of Bernanke today cannot work. Thus, this business of elitists not knowing what is going on is ridiculous. They know exactly what is going on because they planned it that way. We never know when these people will pull the plug, so we keep playing the game on our terms, so that we can retain our wealth. Chances are now 80% that there will be QE3 and more stimuli. They have perfect excuses, the disorder in the Middle East and the tragedy of Japan. The main players know the system is insolvent, but if you look at history you will see that their biggest financial gains and impositions of power takes place during a time frame such as today’s. These tactics allow the major banks, brokerage houses and others to reap enormous profits to bail out their unpayable losses. Soon real interest rates will again rise presenting a very difficult problem for borrowers and at the same time commercial interests will be shut out of the market, not being able to compete with Treasury and Agency bonds. That will be accompanied by much higher inflation, which will also drive yields higher. In addition, investors and professionals are becoming more and more aware of monetization, inflation and corruption at the highest levels. In addition, Rep. Ron Paul is pursing the bogus CPI, PPI and employment figures. Once that is successful the economy will quiver in shock and the unraveling will begin, as many will start questioning everything the Fed and the government does. Things such as the Obama Healthcare plan, which keeps business formation to a minimum and causes businesses that are on the edge to just close up and cease business. Everything possible is being done by the elitists and their bought and paid for Congress to destroy the American economy.

That means with quantitative easing and stimulus will give the economy 2% to 2-1/4% growth, when in reality there is negative growth of 3% or more. No headway is being made in business formation or employment and that will continue and the elitists know that. They are saving Wall Street, banks, insurance, big Pharma and transnational conglomerates. As we warned on December 16th, there was a second meeting at the White House to allow these transnational to do as they did six years ago. On the proviso of creating jobs, which they failed to do the first time, they want a tax holiday. Last time it was $350 billion at 5-1/4% rather than 35% and that cost the taxpayer $150 billion. This time it is $1.9 trillion at 5-1/4%. That will cost taxpayers $680 billion in lost tax revenue. These transnational conglomerates are pure criminals. We’ll continue this thought in the next issue.