International Forecaster Weekly

War Is A Continuation Of Politics And Economics By Other Means

War is a continuation of politics and economics by other means... Salvador option for Iraq... AWOL list going up... Rocket fuel safe for your drinking water... Wisconsin's loss is China's gain... what the state of Georgia and the Taliban have in common... and more!

Bob Chapman | January 15, 2005

War is a continuation of politics by other means said von Clausewitz. What we say is war is a continuation of politics and economics by other means. That quickly highlights the subject of oil, which is why we are in Iraq. The elitist neocons have told us they will stop at nothing to secure oil, domination of the American people and world government. Part of that agenda is the total suppression of the American people. These evil people will be ruthless and un-forging.

When we saw the war in Iraq was eminent, we predicted that the elitists, as they had done so many times before, would Balkanize the country to keep it in turmoil and to be able to have conflict on demand at any time in the future. Foreign Affairs, the literary house organ of the Council on Foreign Relations, came to the same conclusion, although we believe this was in the plans and intentions almost 15 years ago when we stumbled into what they were up too. The election later this month will be a non-event. No one will abide by it and hence the cutting up of the country in three pieces. We will see, but we believe we are correct.

The net of nations opposed to the elitist neocon philosophy is drawing closer. They are China, Russia, India, Iran, Brazil and Venezuela. India has signed a $40 billion deal with Iran to import liquefied natural gas and join in developing three Iranian oil fields. That means if the US invades or nukes Iran, they will have to now deal with Russia, China and India. India will import 7.5 million tons of LNG a year starting in 2009 for 25 years. India’s participation in the Yadavaran field estimated to hold three billion barrels of crude will be 20% or the equivalent of 60,000 B/P/D.

We see the elitists are dredging up Newt Gingrich the old retread, as a stalking horse for the Republican Presidential nominee position in the next election. Between now and then he will front their ideas and make George and the neocons look good. Here is part of his latest! America’s early century goals should be to defeat terrorism, stop driving God from public life, develop “patriotic” immigration and education policies, harness modern science and technology and establish personal Social Security. What PAP, he sounds exactly like George the meathead in the White House. He also says we need to increase intelligence capabilities by two-thirds. Do not be deceived; Gingrich is part of the elitist hoards. You can be sure he will stab us in the back again.

In 2005, we believe that the Fed will raise interest rates 1-3/4% at a very minimum. The ten-year US Treasury note will rise at a minimum of 5-1/4 to 6%. That puts 30-year fixed mortgages at 6-1/2 to 7-1/4% and that is a best-case scenario. Corporate earnings have been rising 15 to 25%. That is over with. We see profit increase in 2005 of 5% to 11%. That means that on fundamentals the stock market is going to be priced at a somewhat lower level. At 6-1/2 to 7-1/4%, there will be little real estate refinancing, many buyers will be far from qualifying for a new home or a first home and that means lower real estate prices. The higher yields also mean lower bond prices. The current account deficit will grow as will the budget deficit. The Fed has to raise rates for the year to 4% from 2-1/4% presently, at a very minimum. They are well aware that inflation already really is 9-1/2% and they have to continue to attract $2.4 billion a day to keep the dollar from falling further than $1.60 euros. They have to offer a yield to foreigners that will entice them to continue to buy US dollar denominated assets. This mind you is the best-case scenario, which excludes any untoward events. Higher rates are not to slow an overheated economy; they are to keep the economy from collapsing. M3 grew at 7.1% in 2004 and bank loans at 9%. The world is awash in liquidity and the Fed will continue to expand M3 over 7%, and bank’s availability over 9%. That guarantees inflation will not come down, it will accelerate. As the year ended, the repo pool was at $70 billion. This is the mechanism the Fed is using to rig markets. It could expand to $150 billion in 2005 as the Fed desperately attempts to hold up the stock and bond markets and to suppress gold, silver and commodity prices. They will continually be assisted by George and the neocons and the working Group on Financial Markets, better known as the “Plunge Protection Team,” via the exchange stabilization fund, a subsidiary of the US Treasury. There is a good chance that during 2005, the Fed and the Treasury will be exposed in their manipulations. The adjudication of the Blanchard lawsuit against Barrick Gold and JP Morgan Chase could be the vehicle that brings this to light. All markets, except gold and silver, are priced to perfection, which means they are all coming down. In 2005, will see a topping in the commodity market as well. It is evident OPEC wants oil prices at $40 a barrel on average so you can expect continued oil borne inflation. We told you to exit the stock market in November at Dow 10,300. It is currently near Dow 10,500. Do not get sucked in, get out. If you have mutual funds move to money market funds and if possible to funds or securities such as the euro, bund (German) and Swiss franc treasuries. The Dow should break 7,200 either in 2005 or in 2006. It should then fall to 4,000 from 4,500. It may go lower later. The stock market will not bail out the baby boomers, nor will it bail out Social Security via partial privatization. If the elitists are allowed to privatize, recipients will end up with $.30 or less on the dollar.

Speaking of the dollar, if not in 2005 than in 2006, the dollar will break 80 and to go to 70. It could be avoided by 15% interest rates and the worst depression the world has ever known. It would bring with it revolution and the liquidation of those responsible.

The dollar’s gain over the last month is irrelevant. All the propaganda in the world is not going to save the dollar. We are interested in long-term trends. A dollar rally just gives you another opportunity to go short the dollar or long the euro, Swiss franc, pound and Canadian dollar. It also gives you an opportunity to switch out of US Treasuries to Treasures in euro, bunds, and Swiss francs. It also allows you the opportunity to buy numismatic gold coins, 90% silver bags and gold and silver shares at bargain basement prices.

Newsweek tell us the Pentagon’s latest approach in Iraq, because we are losing the war, is the “Salvador option.” This is the secret strategy Reagan used in El Salvador in the early 1980s. They used death squads for assassination and kidnapping and this is being contemplated for Iraq. US Special Forces would be used in Syria and in Iraq; it would be carried out by Iraqi paramilitaries. The CIA would run the operation just as they ran operation Phoenix in Vietnam and the Salvador option. They believe this approach will crush the program of broad support for the insurgency. They are wrong. It did not work before and it will not now. This is the ultimate in terror and will be met with terror. Our government is out of control.

The number of American servicemen and women, who have fled the US and are AWOL and are in Canada, are now up to 5,500. They have applied for refugee status and many are from top combat outfits such as the 82nd Airborne. They are listed as common criminals and they are posted on “wanted lists” by the FBI, state police and the Department of Fatherland Securities. This is what happens when you lie about getting into a war. There were no weapons of mass destruction. How George and the neocons get us into these messes is by creating a crisis. The newest is the Social Security crisis that is now and has to be addressed now. Now we have the proliferation of medical liability lawsuits, ‘a crisis in America now’ that can only be fixed by limiting a patient’s right to sue for large damages. They never talk about how many incompetent doctors there are. We saw the same strategy for tax cuts, Iraq and education policies, like no child left behind. It is all a pack of lies. George Bush is crying wolf. These are manufactured crises.

America has staggering debt and $40 million is being spent for the Presidential inauguration. There are nine official balls, scads of unofficial affairs, a youth concert, a parade and fireworks, etc. We call the ostentatious display unseemly.

Has the consumer finally reached their limit? We do not know yet, but the Fed figures reflect a new changing story. Consumer credit outstanding fell by a record $18.7 billion in November to $2,085 trillion. That follows a $9.5 billion rise in October. Are people finally getting smart and reducing debt?

The latest word out of Paris and we are sure, the French are speaking for Europe, is you had better defend the dollar or we will cut your money off.

We have mentioned this several times and you had best pay attention. Under the Patriot Act and the Intelligence Reform Act, anyone can become a suspect and anyone can be detained for their lifetime. We, of course, are prime suspects. We write just about everything the elitists do not want you to know. That is why we went underground two years ago. We were threatened again and as far as we were concerned for the last time. Our government does not need evidence against you; they just manufacture it and then detain you forever. Guantanamo is small potatoes. You have no idea what your government has planned for you if you say anything they do not like. We now have unlimited detainment and imprisonment of government dissenters. As always, there will be those in society who will tell the government so and so said this and that about the government. The goons will come out and pick you up and you will never be heard of again. America is about to become an unlivable place to live. The government is already contracting with private companies to build new prisons here in America to house the malcontents. The prisoners will not be charged with any crime and will never set foot in a courtroom. Even if our court system says you cannot do this, they will do it anyway.

Crude oil is again selling at $45.00 to $46.00 a barrel in spite of more than adequate inventories. Insider sales of shares are higher than the sales records in 2000. We are now seeing runaway inflationary prices in real estate, which usually proceeds a dramatic fall on prices. Higher official interest rates are bound to push short rates higher putting tremendous upward pressure on long rates, which in turn will force up mortgage rates. If long rates do not respond we will see an inverted yield curve, such as England currently has, which is a prelude to massively high yields and eventually a large collapse in speculative asset prices. As of November, citizens were reducing debt. If that were to continue, it would serve as a catalyst for economic correction, which would in turn feed on itself. That is going to make foreign lenders even more reluctant to lend America money by buying US Treasury paper. That has already been happening and if it gets worse the dollar has to fall lower. If our President complies and cuts the budget defect, which we do not believe he will, it will put even more downward pressure on the economy. How will George cut the $320 billion we pay in interest each year? He cannot, so he will have to raise interest rates faster. At a much faster pace than the Fed currently is using. Those higher rates mean higher unemployment, no wage increases and less consumption. Plus the public has no savings. They will have to spend less and that will push the economy down further. Government and personal debt are overwhelming. It will take an entire generation to solve the problems we see ahead. The US consumer is not only tapped out, but he is trapped. There will not be more tax cuts, but there will be a higher cost of debt service. This is severe where the consumer now makes up 89% of GDP. Besides disposable income has dropped 4.8% in the second half of 2004. What do you think foreigners will think when they see this? Foreigners that are holding over $9 trillion in US assets. Foreigners are not stupid, they know as we know all official government figures are lies. They can see the anti-dollar, anti-administration block being formed for self-preservation. The problems go on and on and we can promise you there is no easy solution.

The National Academy of Sciences raises by 20 times the amount of rocket fuel pollution in drinking water considered safe, but environmentalists Monday accused the government of influencing the reports and they have the evidence to prove it. Even after rigging the report the government tried to bury it.

Do not hold your breath, but government says they plan to tighten funding requirements for corporate pensions in order to avoid an expensive bail out of the federal insurance system. That will really cut into corporate profits in a big way. Proposals would force companies to act sooner to top up under-funded programs and those in trouble by making them pay high insurance premiums. The airline and auto industries are headed for trouble. The Pension Benefit Guarantee Corporation (PBGC) is currently $23.3 billion in debt. The Business Roundtable and Chamber of Commerce say such legislation and higher premiums would force good apples, or well funded plans, out of the system. That is nothing more than an implied threat. If that is the case, why doesn’t Congress drop the insurance and then force employers to always fully fund their plans and mark them to the market. The problem is that government has allowed some businesses to only fund 50-75% of their programs and many of the remainder are opportuning the funds in speculative investments to fatten corporate bottom lines. There should be reform and fast, because stocks, bonds and real estate are about to go down and the under funding problem will get much worse over the next several years.

Wisconsin is among the ten states that have suffered the deepest job losses from a flood of low-cost imports into the US from China. Wisconsin lost a net total of 41,150 jobs, or almost 1.5% of its workforce from 1989 to 2003. It lost more jobs than any other state except Maine. The Economic Policy Institute used a theoretical measure of lost “job opportunities” instead of attempting to tabulate the number of China-related job losses. Of course, all the data came from the Bureau of Labor Statistics and the Census Bureau whose statistics are about as straight and honest as a dog’s hind leg. This is the kind of elitist garbage they expect us to believe. The job losses are much, much higher. Simply using a guideline of trade the gap has increased 20-fold over the past 14 years, rising from $6.2 billion in 1989 to $124 billion in 2003. It was up another 20% in 2004, although the numbers are not in yet. Our trade relationship with China is a disaster for the American worker and our country. They admit to 1.5 million lost jobs from 1989-2003, but the figure is double that.

Slower auto sales will necessitate difficult production cuts, lower earning from financing arms that could easily last two years. The combination of production cuts, lower earnings from the financing arms and higher credit defaults could produce a disastrous economic reality for the automotive industry. Manufactures allowed buyers to buy cars with nothing down and lenient credit approvals. What is worse, profits for three years have come from financing, some 75%. As we said two years ago, financing will come back to haunt the industry.

If you are ticketed in Green Bay, Wisconsin you will not only be fined, but you will be fingerprinted. This is the local police’s way of cracking down on crime. Of course, it is being done to protect you. If you refuse, you can be arrested. If you live in Green Bay, move out now.

German daily Handelssblatt reported the EC lost $625 million on its official dollar holdings last year and the loss for 2004 should be over $2 billion. The Bundesbank is also taking massive losses. The low-level of interest rates alone have lost the German Bundesbank $700 million. Dollar reserves make up 64-70% of central bank assets.

The indictment and scandal involving Hillary Clinton’s campaign-finance director may pose a real threat to the Senator’s presidential bid. By undertaking the cost of the party, Rosen was in effect giving Hillary’s campaign an extra $280,000. Like Republicans, Democrats such as Queen Hillary have not escaped from the culture of scandal. We come full circle to the missing billing records; travel office firings; the killing in the commodities market; her brother’s payoff to secure a pardon for a drug dealer; the Madison Bank and the fraudulent real estate deal and the removal of the FBI files. There is no difference between the parties; they are all run by elitists.

At the G-10 meeting the US promised all attending that they would tackle the budget deficit. Foreign investors are increasingly nervous about funding the huge US trade and budget deficits, which has the current account deficit over 5.7% of GDP. The dollar has lost 35% of the value over the past few years and dollar holders do not want to lose another 35%. Yet, if the US puts its house in order, they and the world will have a severe recession, which is a circular problem. We can promise you there will be no improvement in the budget deficit. Interest rates will rise but so will money and credit issuance by the Fed, which will continue to weaken the dollar. France’s Jean-Claude Trichet begs for US fiscal responsibility when he well knows that there is none and will not be any. US Treasury Secretary John Snow’s statements on a strong dollar policy are nothing but lies. Europe and the world can expect zero from the administration.

The New York Times tells us: “3.6 million American workers ran out of unemployment insurance benefits last year, the most in three years.” In November about 1.8 million, or one in five, unemployed workers were jobless for more than six months, compared with 1.1 million when the recession officially ended in 11/01. Since 3/01, the average length of unemployment has risen to 20 weeks from 13. Another tribute to free trade, globalization and outsourcing.

Chief executives’ confidence in the nation’s economy, which had fallen to 63 in the third quarter of 2004, fell in the fourth quarter to 61.

The S&P just revisited 1200 and was unable to hold the level falling to 1185. The price-to-peak earnings on the index have returned to 21. Aside from the 2000 bubble peak, this multiple exceeds valuations seen at any historical market peaks including 1929, 1972 and 1987. This is one of, if not, the most overvalued markets in the history of Wall Street.

The US trade deficit soared to a record $60.3 billion in November. The Wall Street experts said the deficit would narrow to $54 billion – wrong again. The trade shortfall for the 11 months of 2004 was $561.3 billion, well past the record in 2003 of $496.5 billion. We see very little improvement in 2005. Exports fell 2.3% with farm products off 1.7%.

The Georgia drivers’ license bureau has merged with Social Security and some people can’t get drivers licenses. One applicant was born in George, had a license for 26 years and never has received a citation. The reason for denial was that the woman’s maiden name is on her Social Security Card. The names did not match. The point is the state is cross referencing. The clerk told the woman, get a divorce and bring your divorce papers here and we will change it. The lady also has 20 credit cards, three mortgages and several bank accounts in her maiden name. She will have to change all that, along with her Social Security card, over to her husband’s name, or divorce him to get a drivers license. This is a common problem under new federal laws. Incidentally, the Taliban does not allow women to drive either.