International Forecaster January 2008 (#7) - Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
-- Posted Monday, 28 January 2008 Digg This Article Source: GoldSeek.com
The following are some snippets from the most recent issue of the International Forecaster. For the full 23 page issue, please see subscription information below.
The Dow, the S&P 500 and the Nasdaq have, in the first four weeks of 2008, lost all of their gains from 2007 and then some. They are all well into red ink when compared to their 12/29/06 levels. By contrast, since 12/29/06, spot gold has gained 43.16%, spot silver has gained 26.14%, the XAU has gained 30.43% and the HUI has gained 36.44%. Now here are your fundamentals: the credit markets are frozen, the real estate markets are virtually dead with record levels of inventory, much of it vacant, continuing to deteriorate, ARM and pick-a-pay mortgage payments on hundreds of billions in mortgages are about to adjust to unaffordable levels for millions of borrowers, defaults on all types of debt are starting to skyrocket including prime customers, consumer spending and confidence are both decreasing rapidly as hyper-stagflation begins its reign of terror, state budgets are running massive deficits and some are near bankruptcy, inflation is over 11% (officially 4.1%), M3 is about 16% (officially unpublished), unemployment is 15% (officially 5%) and growing as free trade, globalization, off-shoring and out-sourcing continue to decimate our better-paying job sectors, banks are writing off or writing down tens of billions soon to become hundreds of billions in subprime losses and bad mortgages and loans, a looming multi-tens-of-trillions mountain of potential derivative losses continues to threaten markets with a nightmarish thermonuclear meltdown, oriental stock markets are currently crashing while carry trades are unwinding, the United States government is talking about an economic stimulus of 145 billion which is a drop in the bucket meant to delay the day of reckoning past the November elections and is highly inflationary, the Fed is about to cut interest rates again even beyond the recent .75% rate cut as European banks reluctantly consider doing the same with their M3 levels on a par with the US that will send the developed economies of the West into a whirlwind of killer-hyperinflation while developing countries continue to have high rates of inflation, the dollar is at its lowest levels in multi-decades with no end in sight as to how far it could tank, our national debt and trade deficits are out of control while a huge decrease in tax revenues is about to hit at exactly the wrong time due to mega-write-offs of losses that will be suffered in stocks, bonds, derivatives and business income by taxpayers who pay the largest portion of income taxes, oil is at record levels over $90/barrel with peak oil pushing it ever higher, food prices have roared to record highs as the ethanol fraud diverts food into an energy inefficient bio-fuel source, war rages in Afghanistan and Iraq as we waste hundreds of billions on these wars for profit while thousands of our own people are needlessly slaughtered not to mention millions of Iraqis, nuclear threats and issues continue with Iran and North Korea, there is constant discord throughout the Middle East and parts of Africa, Serbia and Kosovo are about to have an armed conflict that could propel us into World War III, Russia is ticked off over our proposed missile systems near its borders and our extremely aggressive, bellicose behavior while it develops and distributes mobile, multiple-warhead ICBMs and carrier-killing missiles and China is competing with us for resources while developing a weapon that can knock out our satellites in outer space.
We ask our subscribers, would anyone in their right mind invest in any of the general stock sectors with this kind of data and fundamentals?
Does not this scenario sound like a poster advertisement for buying gold and silver? Could the fundamentals for precious metals possibly be more bullish than they are now? Buy gold and silver, or prepare to get reamed!!!
Speaking of getting reamed, the odds of us moving into a Much Greater Depression keep getting higher with each passing day as we experience shock and awe at the greed, stupidity, incompetence and fraud that are finally starting to take a terrible toll on our economy and on the economies of Western civilization and the Orient.
We refer to this upcoming calamity of epic proportions as the Much Greater Depression because that is exactly what we expect if our economy continues on its current trajectory, a much greater depression than the one that was initiated in 1929.
This expectation is due to several reasons and circumstances that did not hold true during the Great Depression of the 1930's and which now threaten to lead us into a final conflagration much worse than the first.
First, we have a massive derivatives overhang with the potential for tens of trillions in losses that did not exist in 1929 due to "financial engineering" that has created weapons of mass financial destruction.
Second, we have no manufacturing sector left to lift us out of a recession or a depression. Our manufacturing jobs and facilities have been victimized by an elitist agenda of free trade, globalization, off-shoring and outsourcing accompanied by rampant illegal immigration that was condoned, promoted and sanctioned by our government to break our unions and provide a source of cheap slave labor.
Third, we will have severe hyperinflation before our economy implodes. In 1929, the evil Fed tightened up the money supply much earlier than will be the case in the present day.
Helicopter Ben thinks that this was a mistake based on his Keynesian fantasies and that it "caused" the Great Depression. Had the Fed done then what it plans to do now, the Great Depression would have been much worse because any delay of the day of reckoning only makes the final cataclysm all the more devastating.
This time inflation will climb to levels never even dreamed of in 1929, and high levels of interest will either be voluntarily implemented by the Fed or will be involuntarily imposed by the markets through risk reassessment in order to counteract the destructive impact of such hyper-stagflation as business failures and loan defaults skyrocket.
This hyper-stagflation will either completely wipe out the value of the dollar, bringing it to near zero value, and render all dollar-denominated assets such as US treasuries, stocks and bonds worthless, or double digit interest rates will have to be implemented to get inflation under control. And if we get into double digit interest rates, our economy will be completely and utterly destroyed.
Company profits would get wiped out, the real estate market would suffer a myocardial infarction and keel over dead, and a thermonuclear meltdown of interest rate swaps would be ignited that would in turn cause problems with credit default swaps as principals and counter-parties alike would get wiped out. Such losses could run into the tens of trillions of dollars.
Fourth, we have been taken off the gold standard, so all sense of fiscal responsibility has been lost while worthless fiat paper is passed off as real money. This is why we are going to experience far greater problems this time around as our paper money is rendered worthless by almost a century of fiat money excesses and complete fiscal irresponsibility. This was done intentionally by the privately owned Fed so they could inflate us out of our wealth by charging interest on money created out of nothing by use of the fractional reserve banking system, which is simply a glorified Ponzi-scheme.
Fifth, unlike in 1929, we are now the world's greatest debtor nation. In 1929 and for some time thereafter we were on the way to becoming the world's greatest creditor nation of all time. Our current record national debt and record trade deficits are sucking us dry based on interest payments on our debts alone, much less the principal that is due.
This interest is being paid on money created out of nothing, and unlike in 1929, the insidious inflation of fractional banking has had many decades to wreak its havoc on our economy. Much higher tax rates due to out-of-control social welfare and entitlements has drained us of our spending power and our liquidity in a way that we had not even dreamed of in 1929. Our nation has gone bankrupt while our citizens have a negative rate of savings.
In the Great Depression, our rate of savings went negative after the financial crash occurred, whereas we have been into negative savings for some time now prior to the upcoming crash.
This governmental and individual fiscal irresponsibility will severely restrain our ability to restart our economy.
We have nothing left to work with to spur new growth and investment having all but lost our manufacturing sector. We are totally tapped out and we are all but helpless.
Sixth, worldwide economic integration and communication has interconnected economies on a scale never imagined in 1929.
When the US economy goes down this time, we will not just take a few of our major trading partners down with us.
Virtually everyone is a trading partner with the US today.
When the US super tanker economy goes down this time, it is going to take a much larger proportion of the world economy down with it than occurred in 1929, with far more dire consequences due to a burgeoning world population that will suffer greatly as resources are strained due to a dramatic loss of production that will dwarf what occurred in 1929.
The transportation logistics alone will be a nightmare as oil continues to skyrocket.
Seventh, and finally, the US has a stagnant or shrinking population today.
In 1929, we had a very quickly growing population due to both births and immigration, so we had a natural form of growth occurring where our work force was expanding along with our demand. We had the many taking care of the few.
Now as the Baby Boomers leave the work force we are going to have a smaller population of workers relative to non-workers which has a stagnating effect on growth as the few are forced to support the many, meaning that more money will be bled out of workers to take care of burgeoning entitlements, and this will put a huge drag on our work force and economy by draining our productivity and vastly reducing the amount of money that is available for future savings, growth and investment and for improvements to our infrastructure. Large curtailments of entitlements due to lack of funds are almost inevitable, and this will reduce the spending power of our populace.
We fear that another war is inevitable as the elitist panacea for economic stagnation has always been armed conflict. And with today's technology a world war has much greater destructive power than at any time in the past.
When taken together, the above seven differences from 1929 will place us all in an unenviable position when the Sword of Damocles finally comes chopping down, and frankly, we have no idea how the US economy is ever going to work its way out of this one.
We are going to get hammered and we may well become the next Japan - or worse.
If you want to survive the upcoming Much Greater Depression, get out of debt and buy gold, silver and their related shares like your life depended on it, because your life will depend on it!
Gold and silver are now in the middle of a picture-perfect consolidation before moving much higher as the Fed continues to cut and the dollar tanks. This is the perfect time to take a position before the next leg up! Gold will take a brief respite as the February futures contracts are rolled over mainly to April as well as to later expiration dates. After the rollover is completed, gold will continue to rise to new heights. Open interest for February has dropped this week from the close of a week ago Friday of 247,306 to 187,921 as of this Thursday's close, but we are still hoping that some may hold out for physical delivery to test the gold resources of the cartel which we believe are very nearly tapped out.
Already this Friday spot gold has set an all-time intra-day high of 923.65 and an all-time closing high of 910.50, while gold futures for February did likewise with parallel figures of 924.30 and 910.70, respectively. Silver also set new 27-year highs on Friday with an intra-day high of 16.61 and a closing high of 16.41. We could see more records set early next week due to short-covering as positions for February are closed out and as options expire. There may not be much of a lull at all if the Fed cuts again in their January 29-30 meeting, a high likelihood based on stock market performance since the cut was made, an incredibly dismal performance that is now being blamed on a rogue trader at Societe Generale in France who lost them billions in a complete embarrassment to the banking system in general as well as to the victim bank. This shows you just how rampant the corruption is in our banking system. This rogue trader is just the tip of the fraud iceberg that will sink the world economy. But this is not the reason for the worldwide meltdown. It is all about tanking earnings, rising inflation, a plummeting dollar, and a sinking US super tanker economy with consumers that are broke and unable to generate any further growth in demand. We might also add that Wednesday's 600 point miracle turnaround was another flagrant PPT manipulation to save the markets from a total catastrophe because the earlier collapse would have been a total non-confirmation of the Fed's move to cut rates by .75% and of the 145 billion stimulus package proposed by our government. Prior to this miracle, which has happened before when markets have reacted negatively to a major move by the Fed, the Dow was off about 300 after European markets were flushed down the toilet and given a "swirly" following the Fed's move to cut big which was a total embarrassment to the Fed.
No one has any more confidence in the Fed or in our government, especially pros, because they are finally seeing them for what they really are - lying sacks of deceitful hot air! The dumbest dolt could see that we are spiraling down to plumb the depths of fiat money hell. When the lawsuits start against money managers for gut-wrenching losses suffered by their clients because they did not diversify into precious metals despite rampaging inflation, these dolts will try to claim that official rates of inflation were tame and did not warrant such diversification. As soon as they make this claim in court, judges and juries alike will laugh them to scorn for their vapid stupidity and their stark ignorance.
They were supposed to be professionals and dig behind bogus government statistics to get to the truth on behalf of their clients, and juries will find that they totally ignored the obvious facts when even non-professionals could easily see what was really going on.
THE INTERNATIONAL FORECASTER
SATURDAY - JANUARY 26, 2008 - 012608(7)_IF
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