Tuesday, July 5, 2011

International Forecaster July 2011 - Gold, Silver, Economy + More


World markets and especially US markets are in a state of uneasiness and it is only a matter of time before they degenerate further. The real question is will everything break loose between now and the end of the year? The answer in part is yes, and it is currently in process.

“The President’s Working Group on Financial Markets,” along with elitist insiders normally have the ability to make the stock and bond markets do what they want them to. That is, at least on a short-term basis. We believe the market is being deliberately taken down by them in order to impress upon politicians that if they do not extend the short-term cash debt limit that the market will fall even further and that in turn will reduce their ability to get reelected. If you do not think that is possible then you have no idea what is going on. At the present time with about a month to the August 2nd deadline the two political parties are nowhere near an agreement. As we draw closer to the deadline investors will become more and more concerned and the market will trend lower.

These problems that we predicted for the second half of the year are all coming together like a bad dream. This could very well be a reply of 2008, but for a different set of reasons. Obviously Wall Street knows something others do not know as they resort to large layoffs.

For months oil prices have tended higher. The official CPI is 3.6% when in reality it is well over 10%. Unemployment officially under U3 is 9.1%, when in reality it is 22.6%.

No solution has been found for Greece’s problems, even though an agreement has been made with lenders, and as an extension of that, we see euro, euro zone and European Union problems that probably are unsolvable.

Debt ratings for sovereign nations are falling like ten-pins, which we look at very skeptically. Why were not these ratings reduced by rating agencies some time ago? We see the rating agencies, as controlled by Wall Street, and we see no coincidence that these ratings are all being lowered almost simultaneously. We think these events are being timed to force debtor European nations to heel to European bankers’ demands. By example, it is obviously the intention of Europe’s Black Nobility, which controls such banking, to rape Greece financially and enter it into financial bondage for years to come and they intend as well to render the other five hopeless EU members into the same position.

Little has been done to repair the damage done by the credit crisis, which began in 2008. The financial sector and government has temporarily been kept from failure, but little else has been done. The situations in Europe and the UK are no better. Failure of a debt extension and or default by Greece could lead to a collapse of the world financial system, as we know it. The long-term looting by the Fed, the Bank of England, and many others, day-by-day is being exposed to the public by talk radio and the Internet and the elitists are powerless to stop it. We’d say it won’t be long before the whole world knows what they have been up too for a long time.

The exposure of these facts is affecting public confidence and many are saying, are we next? The entire financial sectors in the US, UK and Europe are now more vulnerable than ever and by the looks of recent economic reports things are looking worse. That is why Greece or debt extension is so important. Their failure could trigger panic. The Democrats in the US House are playing chicken and if a deal is not reached there will be no extension. Further to this China is slowing down and has major inflation problems and a real estate bubble and Japan has been devastated.

As we predicted the Feds will spend $900 billion in their QE2 program. It has injected $2.3 trillion into the financial system September of 2008. The federal government has added $1.7 trillion for a total of $4 trillion and no recovery has appeared. Over the next year $112 billion of the Fed’s government bond holdings will mature and they will use those funds to roll Treasury paper.

The Fed as well holds $914 billion in mortgage backed debt known as toxic waste, and $118 billion of debentures from Fannie Mae and Freddie Mac. They will maintain these levels until September. In July and August plans will be put in place to again increase money and credit in order to assist in the Treasury and agency markets and replace funds, some $850 billion that will not be forthcoming from Congress.

Real unemployment is 22.6%. That should move up to 22.8% to 23% by the end of the year.

The two political parties have been meeting for two months and have accomplished very little regarding the cash debt extension. If no compromise is reached the US credit rating will probably be lowered and interest rates will rise. Zero interest rates are still currently in place. It is not a pretty picture. As we predicted in May 2010, the second half of 2011 is going to fraught with problems.

Wall Street sees what we see, but they are not going to tell you what we will tell you. Their direction and thought process is what you have to watch. Why would the securities and banking business be planning big layoffs and payroll cutbacks? They obviously believe markets are headed lower and they see plenty of problems ahead. Wall Street is pessimistic and they should be because they see what we see. Except for gold and silver shares get out of the market as fast as you possibly can.

GOLD, SILVER, PLATINUM AND PALADIUM

On Wednesday spot gold rose $10.20, as August rose $11.90. Spot silver rose $1.12 to $34.75, as July rose $1.22. These results were in spite of the fact that the Greek party in power voted to sell out the Greek people. (Revolution may now very well follow.) On that news gold and silver and commodities were supposed to follow. Strange things are happening. This was the 5th test for both metals. The next move is upward. Greece bought a year for the insolvent bankers and nothing will improve. It will get worse. That makes Greek debt per capita $64,000 and US $257,000.

Americans, Brits and Europeans may look down their noses at Greeks, but their appalling fiscal state of affairs are just as bad if not worse and their day will soon be at hand. We have seen the march on the Greek Parliament, that is only the beginning as Spain, England, Ireland, Portugal, Italy, England and finally America experiences the same revolt against the financial terrorists known as bankers. Most sovereign world states are going to experience the same financial and economic bloodbath - all those fiat currencies re going to fail. Why do you think China, Mexico, Russia, India, Iran, Argentina, Thailand and others are buying gold? It is because they know their currencies will have to be backed by gold, or they will be worthless. Mexico may soon back their currency with silver, which is natural because it is the world’s second largest silver producer. Gold and silver are the only safe places for your wealth to be.

The total cost of the wars in Iraq, Afghanistan, Pakistan and Libya is $3.7 trillion and it could easily soon reach $4.4 trillion. This does not include long-term costs and obligations to wounded veterans and future war spending. What the elitists and their flunky politicians have done is appalling.

This statement is very important. The fed has approved an extension of their crisis-lending program that allows the ECB, European Central Bank, to borrow US dollars at will. That includes the central banks of Switzerland, England, Canada and Japan. The Fed can lend unlimited dollars it creates out of thin air perhaps forever. Yes, inflation will get much worse as a result.

Recently the US CPI hit 3.6% and today Canada admitted to 3.7%. The figures are bogus, but they will be 5-1/2% by year-end.

Gold and silver both have again formed reverse head and shoulders patterns, which is very bullish. That is why gold and silver shares in the HUI are again coming into their own again, as they again start to outperform bullion.

CANADA

Canada’s inflation rate unexpectedly accelerated in May to the fastest since March 2003, sparking the biggest gain in the country’s currency this month as investors increased bets the central bank will raise interest rates.

The consumer-price index rose 3.7 percent from a year earlier, Statistics Canada said today in Ottawa, exceeding all 24 forecasts in a Bloomberg survey of economists. The median estimate was for a rate of 3.3 percent in May, matching the increases in March and April.

Canadians’ confidence in the country’s economic prospects fell to its lowest in two years amid concern that the global recovery is stalling, according to a poll by Nanos Research.

The proportion of Canadians who predict a weaker economy in the next six months rose to 23.6 percent from 19.1 percent in March, according to Nanos’s quarterly economic survey. The share of Canadians who see a stronger economy fell to 29.2 percent from 30.3 percent. The Nanos Expectations Index, which also includes perceptions related to home prices, fell to 112.8 in the second quarter, the lowest since the second quarter of 2009.

Canada's housing market is in a bubble that's set to burst and prices could plunge by as much as 25 per cent, a major independent research firm warns.

“Housing valuations have lost all touch with fundamentals and household debt is at a record high,” economists at the research consultancy Capital Economics say in their most recent Canada Economic Outlook, issued Wednesday.

“Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard.”

The report predicts a fall in house prices by as much as 25 per cent over the next three years.

A domestic housing boom coupled with high commodity prices worldwide have spared the economy the severe recession felt by other developed countries.

Canada’s economic success could become the thorn in its side as the threat of a downturn in the housing sector looms, the report says.

The firm says a burst housing bubble would shrink real estate investment and hurt consumption two things that would considerably slow economic growth.

This decline in consumption would mean a slowly rising unemployment rate as well, according to Capital.

The company says Canadian house prices are overvalued by approximately 25 per cent, close to excessive levels seen in the frothy U.S. market at its 2006 peak.

Over-building is already visible; the number of unoccupied houses and condos is at a record high. It closely resembles the 1994-95 housing slump, when the construction industry experienced a severe downturn.

The report forecasts falling house prices and smaller residential investment. Real estate currently makes up 6.8 per cent of Canada’s GDP. Lower prices would mean a hit to household net worth as property now accounts for one-third of a family’s total assets, the report found.

The firm expects the Bank of Canada to stay the course in the near term, as financial worries at home and abroad will keep interest rates at their current level for a while.

CHINA

Just a few days ago, China Premier Wen Jiabao pledged to help bailout European countries. Perhaps Wen should keep his powder dry for possible local government defaults in China.

Local govts run up huge debts, risk defaulting local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.

He warned that some were at risk of defaulting on payments.

It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan

A Chinese manufacturing index fell to the lowest level since February 2009, signaling that the world’s second-biggest economy is cooling as export demand weakens and the government reins in credit to control inflation. The Purchasing Managers’ Index was at 50.9 in June compared with 52 in May.

View Bob Chapman, the international forecaster's website