International Forecaster Weekly

Watching A Flatlining Economy

Government debt in the trillions, weakness of the economy, strength in gold and silver, Naked short covering, the myth of bad credit amongst US consumers, very little result for 4.3 trillion in spending, too much debt being the world's problem today.

Bob Chapman | July 9, 2011

Government debt will be in the vicinity of $1.5 trillion this year. Ever since May 16th short-term debt has been frozen at about $14.3 trillion. Up until May 16th the year-to-debt fiscal debt was $783.135 billion. That means if no August 2nd agreement is reach, $275 billion will be needed up to August 2nd, a total of about $700 billion will be needed by 9/30/11, the end of the fiscal year. Those funds are to come from federal pensions, Social Security and Medicare. How will these funds be paid back? We do not know, but we would guess there could be legislation to commandeer private pensions, 401Ks and IRAs. On the other hand an alternative is for the Fed to create $700 billion and buy the Treasury debt. That alone, with normal funding, could reach over $2 trillion. That means they would have to create another additional $850 billion to keep the economy from slipping into a great dark pit. That means additional net funds that would have to be created out of thin air of close to $3 trillion. That means mega inflation 2 to 3 years down the line. In addition the US debt to GDP should be more than 100% by the end of the fiscal year 9/30/11.

We guess the Fed can keep interest rates near zero until borrowers finally get fed up with low returns and a loss in principal, as the dollar deteriorates. It was four years ago when rates were 5-1/4%. Rates in time will return to that level and cause economic and financial devastation. We can also assure you Treasury buyers are not driving rates down and bond prices up, the Fed can take full credit for that. Those who seek safety in low interest Treasuries are giving up purchasing power. In today’s markets there is no such thing as safety.

There are those that believe it is time to start to raise interest rates and that the time for stimulus is past. They are probably correct, but the problem is the economy cannot stand on its own. Although deflationary depression will come eventually to force it now would mean a great war or series of wars would now have to begin.

It also has become self-evident to the populace or at least half of Americans that we cannot keep amassing debt and boosting the economy with stimulus. Their fears are reflected via much higher inflation and major unemployment, both of which are worsening daily. They have experienced three years of this, so to be told by the President, the Fed, the Treasury and Wall Street that what they are experiencing is transitory, reaches deaf ears.

Another grandstanding act by the President and his handlers was the latest release of oil from the Strategic Petroleum Reserve - only enough to replace one days worldwide consumption. This was supposed to show the administration’s concern that Americans were paying too much for gasoline and inflation was cutting their purchasing power. Their attempt was a failure, but the sale brought in badly needed cash to fund the growing deficit. We believe that was really what the exercise was all about. The move also had its negative affects on the commodity and gold and silver markets, at least for a few days. The failure of these financial and economic false flag operations shows you the underlying weakness of the financial and economic structure and the strength of commodities and gold and silver. Every move Wall Street and banking makes lasts only days or a week, then it is right back to the forceful underlying trend. We believe these elitists are now starting to question whether what they are doing will work. An example was the massive naked short covering not seen in years in gold and silver. JPM, HSBC and others lost the battle in silver and capitulated by covering. This was a major event. They knew the RICO class action lawsuit against them was about to be announced, so they covered a good portion of their shorts that were being used to suppress silver prices. Gold reacted by rising almost $35.00 and closing up $32.60 and silver rising $2.25 and closing up $1.80. The professionals know what this means. The cartel has suffered a huge defeat and if JPM and HSBC lose in court, which they should, it will cost the elitists tens of billions of dollars. The question is how will they arrange to transfer the losses to the public, or will the losses be big enough to take JPM and HSBC under. Only time will tell, but the result will be less control over gold and silver markets and a slight move back to free markets. They cannot take too many losses like this. What it shows you is that these people can be beaten and that we will win this war against these criminals.

Over the past few years, lenders have cut back on lines of credit, which has made many Americans unable to access affordable credit. The engine that has driven the economy for many years, cheap available credit, has come to an end and accessibility will become more difficult in the future. A few years ago we noted the availability of credit was beginning to be reduced and in time would reduce consumption. Over those ensuing years many Americans are no longer in the credit system because they cannot meet lending or regulatory qualifications. This is a direct reflection of 22.6% unemployment and massive home foreclosures. The unemployment numbers are even worse than meet the eye. The statistics define the private sector too broadly. In May, the distortion continued with private businesses adding 83,000 jobs of which 34,000 were in health care, social services and education, which are all subsidized. Thus, the real addition was 49,000. Over the past two years 980,000 jobs were added, 7.7 million jobs lost and of 8.4 million jobs lost so far in the inflationary depression only 291,000 have been added. If you cover 11 years instead of five years, 11.7 million have been lost. Real private sector employment was 83.1%. In 12/09 the number was 83.8% and in 1950, 86.2% or a 3.6% drop.

The government needs to revive domestic manufacturing, because foreign nations deliberately devalue their currencies and pay slave wages. The only thing that can change this is tariffs on goods and services. Thus, tightened lending standards and horrible unemployment keep homebuyers from buying into that monstrous inventory for sale. Never mind buy buying a house, those unemployed cannot open a bank account nor do they own a debit or credit card. Credit scores may have risen to 696, the highest in at least four years, but it doesn’t help the unemployed. The other underlying cause is that consumers simply have too much debt, even though delinquencies have fallen 30% in two years. Those with jobs are doing ok, but persistently higher inflation is eating big chunks of their power to consume.

What America is seeing today is a flat lining economy. When the credit crisis began, and it is not over, real GDP fell 4%, vs. 25% in the early 1930s. Can you imagine where the economy would be without the bailout of the financial sector, government and to a lesser degree the economy? We are talking about perhaps $5 trillion that we know about. If you take away unemployment, extended unemployment, food stamps, Medicaid and various other social services, we could be in the same spot today as we were in the 1930s. We have been without recovery for almost five years. At least the Great Depression had recovery in 1933 and 1934. We may not have a WWII on the horizon, but we sure have many perpetual wars for perpetual peace. Today the excuse is rogue states and terrorists, which are just excuses to have more undeclared wars.

We have to laugh at noted economists who continue to bleat about unemployment in the 1930s that was 25% and today it is only 9.1%. In the 1930s U3 was 25.2% and U6 was 37.6%. Today U3 is 9.1%, U6 is 16.3% and if you extract the birth/death ratio it is 22.6%. There were two recoveries in the 1930s, but both aborted. Over the past few years we have seen transitory gains and actually very little result for some $4.3 trillion in spending. Even so-called conservative economists use government-generated statistics, which they know are bogus. How can they hope to come up with the correct answers for future economic and financial problems? In addition most do not get involved in geopolitics, which severely hampers prospectives and projections. Along those lines those who wish for lower commodity prices are engaging in wishful thinking. Not only do we see fire, draught and floods, but we also see geopolitical dislocation and a flight from stock and bond markets to the safety of commodities, gold and silver. That is not going to end anytime soon.

Economists still see recovery without tariffs, recovery, which always eludes them. For several years workers have worked to a maximum of their ability and they still can compete with the emerging world, due to almost zero interest rates. Employers when confronted with a choice of hiring more employees choose to move the work to offshore locations. Attitudes such as this seal the fate of working Americans.

As you can see corporate America has lost its direction. They have become creatures of internationalism, participating in the extinction of the US and its world reserve currency, the dollar. The culture in corporate America is decidedly corruption augmented by government’s drive to implement corporate fascism very reminiscent of Germany and Italy in the 1930s, which was a trial run for today’s government.

The world’s problem is debt – too much of it. Corporate America, particularly Wall Street, thinks debt creation can go on indefinitely as they continue to loot America. The US economy is doing a slow motion swan dive and the corporatists do not care because they believe they’ll become part of this new World Order. What they do not understand is they are stuck in neutral, as they proceed with their looting operations. Worse yet all, or almost alll of the gold belonging to America citizens is gone. The US dollar is like so many other fiat currencies. People often ask, what currency should be in and the simple answer is none, except to function from month-to-month. The record is there one for all to see, all currencies have on average lost value versus gold and silver for 11 straight years. What more can be expected as deficits for all countries mount year after year? This is why almost all governments are trapped. They have to continue to create money and credit or their economies will collapse. The problems are still all there. Greece and the other five lame ducks, the euro and the EU. The European banking system is still staring over the abyss. We have no debt extension. 4% of the SPR has been sold with no net effect on the oil price or availability. To refill the salt domes will be very costly, while in the meantime government has more money to waste. While all this transpires the military industrial complex is laughing all the way to the bank.

The result is investors continue to flee to gold and silver albeit in small numbers. All gold and silver investments only aggregate 0.8% of Americans. What will prices be when 15% of Americans become involved, as that number did in 1980? The success of gold and silver are just a direct reflection of monetary profligacy and the debasement of the US dollar. For the past 2-1/2 years gold has taken over as the only real currency and the dollar can only regain status by again backing the currency with gold. After the recent criminal correction in gold, silver and commodities in just three days, as we predicted the losses have been regained. The suppression cartel is losing its power and soon will become a nonentity. Very soon all will see new highs.

The big question is why hasn’t government and the Fed tried to solve the economic situation? The answer is they have no intention of doing so, because they want the public on their knees economically and financially so they can impose World Government. We have news for them, this time they are going to lose and lose it all. Yes, there is going to be a great war or a series of wars you won’t escape that. These criminals are not going down without a fight and it will be a very nasty struggle.

The banker situation in Greece, that is the rape and looting of the country, is a set piece of what bankers intend to do in all countries.

As we enter the twilight of the American nation we have never been so overwhelmed by the servile incompetence of Congress and its entourage of bureaucrats. We call them team A and team B. As each administration changes the participants change, but their length of service lingers on for many years. They represent the same masters who control them from behind the scenes with the same mission, but with slightly different approaches in order to make it seem change is being made. A great many of these servants from academia although very bright, never had an original thought in their life, never have worked in the business world and all are disciples of John Maynard Keyes and his corporatist fascist philosophy. Is it any wonder our nation is in the state it is in?

These are the same geniuses who created massive increases of money and credit starting 11 years ago, only to cap it off with QE1 and QE2 and stimulus 1 and 2, that have only served to rescue an insolvent financial sector and a corrupt insolvent government, which is still in progress. Wall Street and banking have been treated to massive amounts of money supplied by American citizens, who have seen their life savings foreclosed on. They borrow from the Fed at almost zero percent interest rates to invest in higher yielding bets, and wild speculation in totally rigged, manipulated markets. Just to show you how Wall Street’s rigged game works a number of major firms go for months without having a losing trading day. That is impossible unless the game is rigged, which it is for certain elitist, Illuminist corporations. These profit centers are created to offset the massive losses sustained in bad loans, mortgagees and from other speculations. Banks were leveraged 70 to 1 on average. It is now 20 to 40 to one, up from a normal 9 to 1. As a result government sees only 20% of its debt offerings being bought by Americans and foreigners. The remainder is being bought by the Federal Reserve, which for the most part creates money and credit out of thin air to meet these needs.

We found out that concept of creating money and credit to solve economic problems did not work in the 1930 and it won’t work today. Those who believe it will work are dump or have an ax to grind. The creators of such policies as well know it won’t work, but what better way to bring America financially and economically to its knees? As a result of QE3, or some similar named program will continue and eventually word will leak out that such a new program exists. The numbers for QE3 will probably be $2.3 trillion additional money and credit injected into the system to keep it running until the masters of the universe have their new wars in place and are ready to pull the plug. This is a very dangerous game, because if the public discovers what they are up too they will lose everything. You can understand why alternative talk radio and the Internet are so very important.

As we now know having been told by our illegal alien in the White House, that debt really isn’t debt, and it is impossible for America to default. Yes, and pig’s fly. What we are liable to see in the debt extension increase sage is a repeat of the 1986 Tax Reform Act. That brainchild of Ronald Reagan destroyed 8 million American millionaires, bankrupting them. It simply changed investment rules for write-offs with no grandfathering in a similar debt situation. On the other side the cuts will probably come from Social Security and Medicare, two programs Americans paid for. The idea is to starve the old and make sure they are dispensed with as quickly as possible, as they are simply useless eaters. America marches on head right toward the edge of the cliff with 60% of the population in total darkness not having an inkling of what terrible problems lie before them. Let’s hope we can wake them up.


Michael Busick says his credit union “was shocked’’ to discover his credit score was 812 of a possible 850 when he applied for a $19,500 new-car loan.The loan officer told Busick he rarely sees scores so close to perfect, said the Charlotte, N.C., math teacher, who added that he always pays his bills on time and doesn’t “overextend.’’ He got the funds in May.

The average US credit score - a predictor of the likelihood lenders will be paid back - rose to 696 in May, the highest in at least four years, according to Equifax Inc., a provider of consumer-credit data. The ratio of consumer-debt payments to incomes is the lowest since 1994, and delinquencies have dropped 30 percent in two years, Federal Reserve data show.

Improving credit quality gives households the ability to lift borrowing as concerns ease about rising gasoline prices, hard-to-find jobs, and falling home prices. A reacceleration in spending would belie Morgan Stanley economist Stephen Roach’s assertion that consumers will be “zombies’’ for years because of too much debt.

“The financial situation of the household sector has improved far faster and far more than everyone thought it would two years ago,’’ said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis. “People are still locked into the view that consumers are facing record burdens, and they are not. There has been a change that is sustainable and durable.’’

Bank senior loan officers reported a pickup in demand for auto loans in the second quarter, following first-quarter growth for all consumer lending - the first increase since 2005, according to a quarterly Fed survey released in May. About 29 percent were more willing to make consumer installment loans, the highest percentage since 1994, the survey found.

“The household deleveraging process is much further along than is appreciated,’’ said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pa. “This is evident in the rapid improvement in credit quality. ‘Zombie consumers’ is a mischaracterization of the state of the American consumer.’’

More borrowing could help spur growth slowed by higher gasoline prices, Paulsen said. That will make stocks more attractive than bonds, pushing the Standard & Poor’s 500 Index up about 8 percent to 1,450 by year end, while raising the yield on 10-year Treasury notes more than half a point to 3.75 percent.

Discover Financial Services’ shares have risen about 43 percent this year to $26.55. The credit-card issuer reported a record second-quarter profit of $600 million, as consumers spent more and defaulted less.


Orders placed with U.S. factories increased in May, indicating manufacturing may rebound from a slowdown in economic growth in the first half of 2011.

Bookings for manufacturers’ goods rose 0.8 percent, less than forecast, after a revised 0.9 percent decline in April that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Demand for durable goods that are meant to last at least three years increased 2.1 percent, while unfilled orders climbed the most since September.


Mexican lawmakers say they'll press for the extradition and prosecution in Mexico of American officials who authorized and ran "Operation Fast and Furious," a botched ATF investigation intended to track guns sold in the U.S. to Mexican drug cartels.

"I obviously feel violated. I feel my country's sovereignty was violated," Mexico Sen. Rene Arce Islas told Fox News. "They should be tried in the United States, and the Mexican government should also demand that they also be tried in Mexico since the incidents took place here. There should be trials in both places." Arce is chairman of Mexico's Commission for National Security, a congressional panel similar to the U.S. Senate Judiciary Committee.

Another Mexican senator said the operation "brought very high risk to human lives." Sen. Santiago Creel, a former Interior Minister and a likely presidential nominee next year, said a resignation would not be a satisfactory end to the probe: What happens in Mexico, he said, "must be sanctioned by Mexican laws and under our sovereignty."


Initial jobless claims in the U.S. fell while remaining at a level that shows the labor market will take time to heal.

Jobless claims fell by 14,000 to 418,000 in the week ended July 2, Labor Department figures showed today in Washington. The median forecast of economists in a Bloomberg News survey called for a drop to 420,000. The number of people on unemployment benefit rolls and those getting extended payments also declined.


This morning, there was a stunning development in Congress’s investigation of the Justice Department’s “Fast and Furious” gun-running program: it was revealed that on July 4, Kenneth Melson, the acting director of the Bureau of Alcohol, Tobacco and Firearms and the Obama administration’s intended fall guy in the scandal, broke ranks with his superiors. Without their knowledge, he gave an interview to Darrell Issa’s House Committee on Oversight and Government Reform, accompanied only by his personal attorney. While a transcript of that interview is not yet public, it is clear that he blew the whistle on senior officials in the Justice Department.

This morning, Issa and Senator Charles Grassley released a letter that they sent yesterday to Attorney General Eric Holder. It is explosive, to say the least. You should read it in its entirety; here are some excerpts:

Yesterday, Acting ATF Director Kenneth Melson participated in a transcribed interview regarding Operation Fast and Furious and related matters with both Republican and Democratic staff. He appeared with his personal counsel, Richard Cullen of McGuire Woods LLP. His interview had originally been scheduled through the Justice Department to occur on July 13 in the presence of DOJ and ATF counsel. As you know, however, under our agreement Department witnesses who choose to attend a voluntary interview with their own lawyer are free to exercise that right rather than participate with counsel representing the Department’s interests.

After being made aware of that provision of our agreement, Acting Director Melson chose to exercise that right and appeared with his own lawyer. We are disappointed that no one had previously informed him of that provision of the agreement. Instead, Justice Department officials sought to limit and control his communications with Congress.

DOJ’s effort to cover up the Fast and Furious scandal is one of the letter’s themes.

According to Mr. Melson, it was not until after the public controversy that he personally reviewed hundreds of documents relating to the case, including wiretap applications and Reports of Investigation (ROIs). By his account, he was sick to his stomach when he obtained those documents and learned the full story.

More on the DOJ’s attempt to hide the scandal from Congress:

Mr. Melson said that he told the Office of the Deputy Attorney General (ODAG) at the end of March that the Department needed to reexamine how it was responding to the requests for information from Congress.

According to Mr. Melson, he and ATF’s senior leadership team moved to reassign every manager involved in Fast and Furious, from the Deputy Assistant Director for Field Operations down to the Group Supervisor, after learning the facts in those documents. Mr. Melson also said he was not allowed to communicate to Congress the reasons for the reassignments. He claimed that ATF’s senior leadership would have preferred to be more cooperative with our inquiry much earlier in the process. However, he said that Justice Department officials directed them not to respond and took full control of replying to briefing and document requests from Congress. The result is that Congress only got the parts of the story that the Department wanted us to hear.

Issa’s committee has learned that other federal agencies, including the FBI and DEA, were involved in Fast and Furious, and that there was a failure to share information that was known to those other agencies:


When confronted with information about serious issues involving lack of information sharing by other agencies, which Committee staff had originally learned from other witnesses, Mr. Melson’s responses tended to corroborate what others had said. Specifically, we have very real indications from several sources that some of the gun trafficking “higher-ups” that the ATF sought to identify were already known to other agencies and may even have been paid as informants. The Acting Director said that ATF was kept in the dark about certain activities of other agencies, including DEA and FBI.

The evidence gathered by Issa’s oversight committee suggests that the Obama administration may actually have financed the purchases of firearms by known criminals, which then wound up in the hands of Mexican gangs and were involved in murders, including the murder of an American border patrol agent:

The evidence we have gathered raises the disturbing possibility that the Justice Department not only allowed criminals to smuggle weapons but that taxpayer dollars from other agencies may have financed those engaging in such activities. While this is preliminary information, we must find out if there is any truth to it. According to Acting Director Melson, he became aware of this startling possibility only after the murder of Border Patrol Agent Brian Terry and the indictments of the straw purchasers, which we now know were substantially delayed by the u.s. Attorney’s Office and Main Justice.

Issa and Grassley link the Obama administration’s effort to slide Melson out of his position, making him the fall guy for the Fast and Furious operation, with Melson’s complaints to Deputy Attorney General James Cole, the number two official in the Department of Justice, about DOJ’s failure to respond adequately to Congress’s requests for information about Fast and Furious:

However, two days after he told Acting Deputy Attorney General Cole about serious issues involving lack of information sharing, the Wall Street Journal reported that unnamed sources said that Melson was about to be ousted.

The full transcript of Melson’s testimony, when released, will be a fascinating document. In the meantime, it appears clear that the Fast and Furious scandal reaches to the very top of Barack Obama’s Department of Justice.


Ron Paul, the conservative congressman from Texas, beat the entire field of GOP presidential contenders in a poll conducted recently among "882 highly active Republican voters in Texas."

Answering the simple question, "If the Texas Republican primary were held today, which presidential candidate would you be most likely to vote for?" 22% of those polled selected the 75-year-old affectionately known as Dr. No.

Gov. Rick Perry came in second with 17%, followed by deep dish pizza lover Herman Cain (14%), with Newt Gingrich placing fourth at 11%.

Texans don't seem to care much for former Massachusetts Gov. Mitt Romney or Minnesota Rep. Michele Bachmann, who got 8% and 7% respectively in the poll conducted from May 29 to June 3 by an outfit called Azimuth Research Group.

Azimuth seems to have only done a few polls, judging from its website. If you write to the email address provided on the site, it quickly bounces back with  "Unknown address error 550-'unrouteable address.'" Also, the only photo on the site is one of several people on the phone that looks remarkably similar to one taken by a Flickr user named Barack Obama who captioned the photo as "Phone Bank to Repeal "Don't Ask, Don't Tell."

Other than that, everything seems perfect. Looking forward to seeing Dr. Paul square off against President Obama.



When Mr. Njoku showed up at the Chase branch near his house intending to cash the check, he was in for a nasty surprise.

The check had Njoku’s name and address on it and was issued by JP Morgan Chase.
But the Chase Customer Banker who handles large checks at the Auburn branch was immediately suspicious.

“I was embarrassed,” Njoku said. “She asked me what I did for a living. Asked me where I got the check from, looked me up and down"

The Customer Banker said the check looked fake, so she took it, along with Njoku’s

driver license and credit card, and called Bank Support.   

After waiting for about 15 minutes, Njoku said he got impatient and told Chase he was leaving to do an important errand. By the time he got back, the bank was closed.
Njoku said he called customer serviE.ce and asked them what he should do. He says they told him to go back to the bank the next day to get his money.

But when Njoku arrived, it wasn’t the money that was waiting for him

“They just threw me in jail; they called the police and said this guy has a fraudulent check,” Njoku said

Auburn police arrested him for forgery - a felony crime.

“I was like - you’re making a mistake, you’re making a mistake, don’t take me to jail,
got work tomorrow. I can’t afford to miss work,” he said.

Njoku was taken to jail on June 24th, a Thursday. The next day, Chase Special

Investigations, realized it was a mistake. The check was legitimate.
The Investigator called Auburn Police and left a message with the detective handling the case, but it was her day off. So Njoku stayed in jail for the entire weekend. Finally,

On Monday, he was released In the meantime, Njoku’s car had been towed from the bank parking lot and his check seized as evidence.“I had to wait a couple of weeks,” he said, “and my car got sold, auctioned off.

Njoku says he didn’t have the money to pay the impound fees and fines to get his car back before it was sold. He said he also lost his job because he didn’t show up for work while he was in jail.

After all of that, Njoku said he never heard a word from Chase.

“They treated me like a criminal,” he said

“They haven’t even sent me a letter or apologized,” he said

A Seattle attorney offered to help. Last week, Felix Luna sent Chase a scathing letter. Read the attorneys' letter to Chase
Jailed for cashing Chase check at Chase bank | Seattle