International Forecaster January 2008 (#4) - Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
Posted Monday, 14 January 2008
The following are some snippets from the most recent issue of the International Forecaster. For the full 25 page issue, please see subscription information below.
US MARKETS
As we told you in 2001, there is no turning back. There is absolutely no way the Fed, Washington and Wall Street can stop the recession and the direction in which the economy is headed. In fact, we don’t believe they can stop the economy from entering depression and that has been our view for seven years. The stock market rally over the past four years was created out copious cheap money and credit.
Now that it is obvious America is in recession, our politicians are calling for a stimulus package so that we can again spend our way out and create more debt. Under our corporatist fascist government business and especially the US Chamber of Commerce, that same group that wants amnesty for illegal aliens, so they can exploit their cheap labor, are pushing for lower corporate tax rates and a tax credit for business investment. Congress wants a mixture of monetary and fiscal policy. A small increase in government spending now, an interest rate cut late in January, plus tax cuts triggered if economic growth falls below a certain level.
We are just talking billions. It is not like they are talking big money. Just a $10 billion in stimulus, which is peanuts to the economy and won’t help much. Then again, those in Congress can prove their worth to their constituents by saying see we tried to help you. That is a far cry from the $500 to $700 billion a year flowing from real estate into consumption. The question is can Congress and the neocons even reach an agreement on such an infusion? Either way the Fed can always take the issuance of money and credit up to 25% or so. The Fed is always trigger-happy when it comes to extending money and credit. They have great excuses, a recession, a collapse in real estate and credit cheating banks that are on the edge of disaster. Who cares about inflation when saving the economy is at stake. Besides the Fed doesn’t dare allow deflation to get an upper hand. In addition we have only fallen ¼ to 1/3rd of where we are headed and the credit and banking crisis could last for years.
Keynesians and other Illuminists do not care to understand that the results of fueling apparent growth by the expansion of money and credit cannot bring real growth. Money and credit are mediums of exchange – they do not create economic growth. Excessive injections of money and credit into our economy can only create inflation. If that is so the Fed is doing the wrong thing. The Fed is increasing banking reserves and that is exactly what they did in the late 1920s. From 19021 to 1929, money stock increased 7.7%. Today it is up 17.5%. This can only lead to the destruction of the dollar.
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GOLD, SILVER, PLATINUM, PALLADIUM AND URANIUM
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All that glitters is silver and gold. The precious metals and their related stocks have out-shined all market sectors, and have now separated themselves from the other sectors just as they did in the last precious metals boom cycle that culminated in the blow-off top that blew itself out in January of 1980 as double digit inflation and interest rates sent the US economy into the tank during the Carter Administration.
Gold and silver have entered into record territory now in all possible categories, most of them being all-time highs! They have done so in stark contrast to the general stock markets which have dropped off a cliff and are headed into financial oblivion with the severe technical damage that has just been administered, damage that can only be corrected with a minimum .5% rate cut from the Fed and a super-wimpy yen that allows carry traders and derivative junkies to go wild with rampant speculation as they ride a tsunami of credit and receive a series of helicopter drops of money that will send interest rates into double digits and create a terrifying scenario of hyper-stagflation that will eventually bring down the entire derivative house of cards which in turn will initiate the Much Greater Depression as real estate markets in much of Western civilization and financial markets around the world are stopped dead in their tracks and the entire world financial system starts its long slow death spiral into fiat money hell, becoming the worst economic disaster of all human history! The only beneficiaries will be gold, silver and their related stocks as non-resource stocks, bonds, derivatives, currencies, and most commodities take it on the chin. The US economy is like a super tanker hitting an iceberg, and all those economies which have their lifeboats on board or which have their lines attached to it will be taken down with it. Whatever measures our reprobates and sociopaths in Washington and on Wall Street come up with will be like trying to stop the super tanker US economy from running aground using the anchor from a tiny toy ship.
Remember to thank the malevolent and incompetent private Federal Reserve and the megalomaniacal Illuminati for allowing their greed and avarice to ruin many thousands of years of progress, and hundreds of years of their own planning, in a single decade. If it is any consolation, many of the Illuminati, those that lacked the intelligence to hoard gold, will be joining you in the soup lines as we all get to play Oliver Twist and ask "please, sir, may I have some more?" For whoever the next unfortunate President of the US may be, we can only quote Mr. T by saying: "I pity the fool!" Of all the presidential candidates, only Ron Paul knows how we got into this mess, and only Ron Paul knows how to get us out of this mess.
If you dared to think that economic demand from emerging economies like China and India would help to keep us afloat, better think again. Look at what is happening to Japan and Singapore! Their economies and stock markets are now in free-fall while the US economy has just started its long swirl around the economic toilet bowl. It will only get worse from here. And if you dared to entertain any doubts about whether the "Big R" is at hand, you might note that the RBC Cash Index for early January indicates that consumer confidence has dropped a mind-numbing 9.6 points from a late December reading of 65.9 to a reading of 56.3, an all-time low for the index which was initiated in 2002 and a bad omen for retail sales statistics which will be given next week. When you consider the precipitous drop just suffered by the ISM Index the previous week, any thoughts of a soft landing or any doubts about whether we are already in a recession have just been vaporized. And if you further dared to think a weaker dollar would boost our exports, save our GDP and stop the bleeding in our trade deficit, you might note that we just had the largest monthly trade deficit in 14 months in November, a mind-blowing 63.1 billion when the "experts" were expecting "only" 60 billion. That is a stunning 9.3% increase. Our trade deficit grew by 3% to 205.4 billion, while our trade surplus grew by only .4% to 142.3 billion. So much for that theory.
As the general stock markets went into free-fall this week, by contrast, gold, silver and their related stocks went tearing down the highway like the Roadrunner, ripping the Coyote Cartel a new one in the process. The gold and silver markets have removed the cartel's shackles and escaped their imprisonment like Edmond Dantes in Alexandre Dumas' "The Count of Monte Cristo," and the latest incarnation of Edmond Dantes is now out for savage revenge. And that revenge has been sweet as this past Friday, January 11, gold, silver and their related stocks have set either all-time or 27-year records across the board. Spot gold hit an all-time intra-day high just shy of 900 at 898.15 and set a fresh all-time closing high of 894.90. Gold futures on the COMEX most active contract (February) has now crossed the 900 mark for the first time ever to set a new all-time intra-day high of 900.10, with a new all-time record close of 897.70 thereafter, and all this despite an all-time high mountain of shorts with gold futures open interest of 586,476 contracts as of Thursday's close. The COMEX bears just became crispy critters as their village was destroyed by lava flows and hot ash emanating from the trembling volcano of shorts topped with a caldera of molten gold and silver. The cartel's mountain of gold and silver shorts has just erupted in a seismic, cataclysmic event of epic proportions, releasing a pyroclastic flow that has vaporized the diabolical sociopaths of the cartel.
This followed last week's COMEX sponsored Financial Heavyweight Championship of the World where the Barbaric Relic knocked the Raving Reprobate out of the ring with a jaw-crunching right cross on gold's breaking of the 850 mark, while the Knight of Economic Reality chased the yen-hitting Japanese bankers around the ring in joyous celebration. Once again, it was entertainment at its finest!
Not to be left behind, silver awakened from its slumber to hit a new 27-year intra-day of 16.29, and then set a fresh 27-year closing high of 16.23. Looks like the Silver Surfer may be on the rampage. Not to be outdone by its commodity cousins, the XAU squeezed out a new all-time intra-day high and an all-time closing high of 195.51 and 193.55, respectively, as the large specs set out to make their point to the hapless cartel in no uncertain terms that: "we are going higher and there is nothing you can do about it." The HUI followed in the path of the XAU, skyrocketing in a resounding fashion to set a new all-time intra-day high and an all-time closing high of 479.47 and 475.16, respectively, thereby emphasizing the message to the cartel that: "we will not be denied."
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