Bob Chapman
The International Forecaster
September 21, 2009
To borrow from an old joke about politicians, we ask our subscribers if they know how to tell when Helicopter Ben Bernanke, the current Fed Head, is lying. Answer: Whenever his lips are moving. Now we hear from the Dollar-Destroyer that our recession has technically ended (heaven forbid that we should call our current Fed-caused calamity a depression, which is what it has been since Obama took office) . So we guess that we should take his word for it, seeing that every call he has made during his short tenure as Chairman of the Federal Reserve Board has been 100% wrong.
Surely you’re joking, Mr. Bernanke!!! Apparently, we are just supposed to ignore our tanking dollar, rising unemployment, ever-weakening consumer spending (which only accounts for 70% of our GDP), a moribund real estate market, trillions in losses lying dormant in the zombie bank mark-to-model scam, not to mention all the off-the-books losses in derivatives pawned off on bank customers after Glass-Steagall was repealed as well as a glowing, smoking Quadrillion Dollar Derivative Death Star waiting to go supernova to the tune of tens of trillions in losses that will vaporize the entire world banking system thanks to the total deregulation of OTC derivatives courtesy of the Commodities Futures Modernization Act. Then there are the ongoing multi-trillion dollar money siphons in Iraq and Afghanistan, thousands of banks, including all the “anointed” legacy banks, that are buried in derivatives and about to fail, a bankrupt Social Security System, a totally naked FDIC, a Fed printing trillions of dollars out of thin air, in secret, without any accountability, and future multi-trillion dollar budget deficits being incurred to keep a totally comatose economy on artificial, taxpayer-sponsored life support. If that sounds like the end of a recession to the people on planet earth, then beam us up Scotty, we’re on a planet full of psychopaths suffering from hallucinations and delusions of grandeur. Oh, and Scotty, make sure you remember to beam our gold and silver up with us. We’re certainly going to need it the next time we come back to Planet Earth for an exploratory visit to see if the collective, ongoing phantasmagoric, mushroom-induced hallucinations of its inhabitants have finally run their course.
Note that open interest for the USDX, after rising to a little over 41,000, which is above average, has suddenly collapsed to below 34,000 as of 9/16/09. The dollar is no longer being defended because the Illuminist cabal plans to take the stock markets up to a blow off interim top around Dow 10,000 to 10,500 with a final short-covering rally either this week, or perhaps the middle of next month, as general stock market options expire. They will then attempt to orchestrate a major stock market correction, which is now long expected and long overdue, just as gold and silver really start to take off.
The only question is, how long and how high will they try to take the stock markets before the long awaited correction is allowed to occur as the PPT withdraws its support. The answer, as usual, will be determined by the gold and silver markets, and the strength of their now ongoing rallies. If the rallies in gold and silver get out of hand as hundreds of millions of Chinese and Indians jump on the gold and silver bandwagons while China reneges on its losses in OTC gold and silver shorts, you can count on a major stock market correction immediately. Another tip off will be a large jump in open interest for USDX futures contracts again, this time probably to well above the 50,000 level. This will be the dollar’s and treasury’s last hurrah as the Illuminati will be immediately forced to recommence the stock rally or face the defeat of any and all of their proposed legislation on Goldman Sachs’ “cap and trade” scam, on the Obama-Kennedy-Kavorkian Euthanasia Plan and on the military expenditures for Afghanistan. After citizens watch their pensions and mutual funds nose-dive toward oblivion for a second time, they will immediately decide that they can’t afford to spend another penny. Crashing stock markets beyond a 50% correction would thoroughly discredit Obama’s Stimulus Pork Plan and would also put crushing pressure on the Fed. Unless the stock markets recover quickly, the sheople will scream for the Fed’s blood and the Audit the Fed bill will become a foregone conclusion.
A stock market crash will make people downright venomous toward this cabal of middle class pauper-makers. The Illuminati are now caught between a rock and hard place. If they don’t crash the stock markets, the tanking dollar and treasuries will be toast and gold and silver will rip them a new one and expose their mishandling of our money supply and our economy. If they crash the stock markets to put an obstruction in the path of gold and silver, they risk political annihilation, legislative suicide and an audit of the Fed, which will be followed by a hue and cry for its termination when everyone finds out how thoroughly they have been screwed for the past 95+ years. Their options are weak and few. All they can do is play the obstructionist with bogus delay tactics, but in the end they will get buried.
If they fail to take gold and silver down low enough to cover, a distinct possibility, the cartel’s shorts will get vaporized, and gold and silver will go on a moon-shot. They are now fighting the combined populations of China, India, Japan, the Middle East, Southeast Asia, Germany and most of Western Europe, as well as the governments of Germany, China (especially the region of Hong Kong) and the Gulf Cooperation Council countries, whose gold they have stolen, leased or encumbered. These nations, who foolishly entrusted their bullion to the US Illuminist cabal, have been left exposed as sitting ducks for a hyperinflationary supernova. These countries are hopping mad about this, and all they have on their minds now is self-preservation and vengeance. Due to the ongoing financial debacles and bailouts going on globally, and the profligate policies of central banks worldwide that are causing fiat currencies everywhere to lose ground against gold, people will be looking to precious metals for an alternative to paper assets denominated in fiat currencies.
We would highly suggest that Buck-Busting Ben Bernanke and the twelve Presidents of the regional Federal Reserve Banks make arrangements for the international banking cabal’s version of The Last Supper. We hear through the grapevine that an “Upper Room” is available in the US Capitol Building. You can bet Ben will be running for his helicopter before the crucifixion gets under way! Obama and the twelve members of the Federal Open Market Committee can then do a repeat performance (but without Ben who will be long gone in his helicopter). You can bet Obama will be headed for Air Force One for a one-way trip to Kenya, or Indonesia, or wherever the heck he really comes from! Where is the Border Patrol and ICE when you need them to remove an illegal alien!?
Friday September 18th is the day our government will no longer guarantee money market funds. In anticipation of this event professionals have been moving funds out of these vehicles; some 15% over the past month. What the administration, and particularly the Treasury want to do is try to get those funds directly into Treasuries and into banks. From our point of view neither are safe, nor are credit unions. Those funds should move into gold and silver related assets and for those who must have currency liquidity, those funds should go into Canadian and Swiss Treasuries to profit from the continued fall in the US dollar. You must get your money out of banks, US government debt and anything connected with the US stock and bond markets. The exception being gold and silver shares. All major American banks, which hold 70% of deposits, are broke and so is the FDIC. You have no insurance unless you are willing to accept $0.30 on the dollar. You must be out of all these vehicles. The money market funds are loaded with suspect corporate debt never mind Treasury debt. We recommended Swiss and Canadian Treasuries some time ago. The dollar has fallen and all these thousands of investors have made money. Get out of money market funds. Already 1/3rd of these funds have had their NAV’s below a dollar since 7/07. They are still holding some very risky paper. Almost 40% is in CD’s of foreign banks, 10% in short-term corporate paper and over 12% in medium-term corporate paper. About 68% is in taxable non-government funds. You will see a great decline in money market fund assets as holders foolishly transfer the funds into FDIC-insured accounts, CD’s and Treasury instruments of one form or another. The only real safe place to go is to gold and silver related assets and if you must Canadian and Swiss Treasuries.
- A d v e r t i s e m e n t
Commercial paper rose $16.1 billion; asset backed CP rose $18.1 billion versus $6.2 billion the previous week. ABCP outstanding was $501.5 billion versus $483.5 billion the prior week. Unsecured financial CP issuance fell $9.7 billion versus $6.2 billion.
Capital from foreign sources was $612 billion in 2007 and $675 billion in 2008. This year in May it was -$54.6 billion; -$57 billion in June, -$56.8 in July and -$97.5 billion in August.
Capital is leaving at an accelerating rate. This means interest rates should be raised. The Fed is monetizing and in all likelihood that will increase and that will lead to a currency crisis. The Fed has said it will ease quantitative easing, but if it does the stock and bond market will fall. If they increase there will be a currency crisis. There is now no question the dollar is being sacrificed. The idea is to allow it to fall incrementally and as slowly as possible.
We have continued to state the Amero will not replace the dollar and that it is and has been a false issue. The dollar will be replaced by another dollar in either 2010, 2011 or 2012. As we explained in early May when the dollar was 89.5 on the USDX, that this was the top. Next stop by the end of October would be 71.18, or at least by yearend. After that comes 40 to 55 and then an official devaluation and default; as all currencies and debt would be dealt with at a special meeting involving all countries.
Debt in the banking system is going to be absorbed by the Fed. Almost all major banks are bankrupt. That is why you do not want to have much money in banks and no CD’s; cash value life policies or annuities. Next year we will witness a second round of debt write offs and a crisis in the derivative market. If the Fed doesn’t monetize the debt the system will collapse, but then again there may be no Fed if HR1207 becomes law. Every problem would then lie in the lap of the Treasury. The American financial system is unsustainable and our foreign wars and occupations will come to a close in 2010 or 2011. The cost will no longer be sustainable. The US stock and bond markets will fall and you will not want to own any US government obligations. It could be that the role-played by the Fed, if the Fed is replaced, could in part be played by Goldman Sachs and JP Morgan Chase. Due to the Fed’s absorption of bad assets it could be that the Fed will self-destruct in the process of being legislatively being eliminated. Recovery of the US economy would then depend economically on tariffs on goods and services to bring manufacturing back to America.
A CBS News blogger named Declan McCullagh seized on the documents, which CEI obtained through a Freedom of Information Act request, and said: “The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.” He added: “At the upper end of the administration’s estimate, the cost per American household would be an extra $1,761 a year.”
The Bank Implode-o-meter: Wells Fargo’s Commercial Portfolio is a ticking time bomb.
In order to sort through the disaster that is Wells Fargo’s commercial loan portfolio, the bank has hired help from outside experts to pour over the books… and they are shocked with what they are seeing. Not only do the bank’s outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank, Wachovia, which Wells purchased last fall as it teetered on the brink of collapse, was so desperate to increase revenue in the last few years of its existence that it underwrote loans with shoddy standards and paid off traders to take them off their books.
According to sources currently working out these loans at Wells Fargo and confirmed by Dan Alpert of Westwood Capital, when selling tranches of commercial mortgage-backed securities below the super senior tranche, Wachovia promised to pay the buyer’s risk premium by writing credit default swap contracts against these subordinate bonds. Should the junior tranches eventually default, then the bank is on the hook.
For the past 14 years, the gap between the two measures has grown persistently, with operating earnings topping GAAP earnings by an average of $2.47 a share per quarter.
When using a 10-year trailing average of earnings to erase cyclical gyrations, operating earnings are nearly 24% higher than GAAP earnings, the highest ever.
It isn’t clear why the difference has grown so wide. One inescapable conclusion is that, since 1995, either by happy accident or accounting shenanigans, one-time losses have grown more quickly than one- time gains, elevating the operating earnings that Wall Street watches.
The investment implications are many. For one thing, two earnings measures produce two market valuations. The S&P 500 trades at 21 times the past 10 years’ GAAP earnings and 17 times operating earnings. Neither is exactly cheap, but one is much pricier than the other.
Japan urges talks on US military base Japan considers revision of a deal with the US to relocate a military base to be a top diplomatic priority, Tokyo’s newly appointed foreign minister has told the Financial Times, waving aside concerns that reopening the agreement could undermine the alliance between the countries.
The declaration by Katsuya Okada, a senior member of Japan’s ruling Democratic Party (DPJ), highlights the international implications of the party’s determination to set a more independent diplomatic agenda. GQ excerpts Speech-Less: Tales of a White House Survivor by ex-Bush speechwriter Matt Latimer:
We wrote speeches nearly every time the stock market flipped. Meanwhile, the White House seemed to have ceded all of its authority on economic matters to the secretive secretary of the treasury…(In the weeks that followed, Paulson changed his spending priorities two or three times. Incredibly, he’d been given the power to do with that money virtually anything he pleased. All thanks to a president who didn’t understand his proposal and a Congress that didn’t stop to think….)
Chris had just come from a secret meeting in the Oval Office, and without so much as a hello he announced: “Well, the economy is about to completely collapse.”
You mean the stock market?” I asked.
“No, I mean the entire U.S. economy,” he replied. As in, capitalism. As in, hide your money in your mattress.
The Secretary of the Treasury, Hank Paulson, had sketched out a dire scenario. And Chris said we’d have to write a speech for the president announcing his “bold” plan to deal with the crisis. (The president loved the word bold.) The plan… Basically, it could be summed up as: Give me hundreds of billions of taxpayer dollars and then trust me to do the right thing…In some cases, in fact, Secretary Paulson wanted to pay more than the securities were likely worth in order to put more money into the markets as soon as possible. This was not how the president’s proposal had been advertised to the public or the Congress. It wasn’t that the president didn’t understand what his administration wanted to do. It was that the treasury secretary didn’t seem to know, changed his mind, had misled the president, or some combination of the three.
When White House press secretary Dana Perino was told that 77 percent of the country thought we were on the wrong track, she said what I was thinking: “Who on earth is in the other 23 percent?” I knew who they were—the same people supporting the John McCain campaign. Me? I figured there was no way in hell any Republican would vote for that guy. John McCain, the temperamental media darling, had spent most of the past eight years running against the Republican Party and the president—Republicans on Capitol Hill and at the White House hated him. Choosing John McCain as our standard-bearer would be the height of self-delusion.
He [Bush] paused for a minute. I could see him thinking maybe he shouldn’t say it, but he couldn’t resist. “If bullshit was currency,” he said straight-faced, “Joe Biden would be a billionaire.” Everyone in the room burst out laughing.
The latest propaganda on quantitative easing and reining it in reaches us. Evidentially the G-20 meeting in Pittsburgh later this month will put together a roadmap outlining how to reverse previous stimulation of world economics. If that happens the world financial structure will collapse. They know that just as well as we do. The IMF wants the G-20 to coordinate the unwinding of these efforts. Of course, the players all know inflation is on the way and they want to make people think they are going to do something about it. Even the Fed says it is ending quantitative easing at the end of the fiscal year on 9/31/09. We know that cannot be true with the Treasury issuing $2 trillion in bonds in this coming fiscal year.
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