8 December 2008

Hyperinflation dead ahead?

By: Bob Chapman, The International Forecaster

The following are some snippets from the most recent issue of the International Forecaster. For the full 40 page issue, please see subscription information below.


It should be obvious that throwing hundreds of billions into a black hole of losses numbering in the tens, and perhaps even hundreds, of trillions (i.e. the Quadrillion Dollar Derivative Death Star), is like trying to empty the Pacific Ocean with a coffee can. Let's take ten trillion and buy out all the mortgages in the US, and then modify all the interest rates to a 5% fixed rate. We can float 10 year treasuries at 2% to fund the deal, and pocket the 3% spread of $300 billion, which we can use to shore up our budget deficit, to rejuvenate zombie corporations after we run them through Chapter 11, and to make loan workouts for those who can't even afford 5%, which would number in the millions, because fogging a mirror was the only qualification for getting a mortgage over the past five or so years. This will cure all real estate defaults and immediately convert the toxic waste into real AAA paper for the first time while everyone gets to buy a new house at 5% fixed also, thus saving the real estate market. The banks, now flush with cash, can start lending again because their balance sheets have been restored, and get back into the mortgage business by doing both refinances and purchases, while our foreign owners of agencies and treasuries rejoice, and while owners of what was once toxic waste start tap dancing on the ceiling. As the government-owned mortgages are paid off, we can use the proceeds to either float new mortgages at a 3% spread, or we can use the payoff money to pay down the ten trillion dollar treasury loan and let the banks take over again, this time with oversight and regulations that will put people in jail if they pull their cute little scams again.

We can then also float another ten trillion dollars in bonds at 2%, and give every American, young and old, $33,000, which they would have to use with the following pre-established priorities: (1) Cure any mortgage defaults, (2) pay off any credit cards and car loans, and (3) buy a hybrid car that gets 30+ miles per gallon from an American car manufacturer, or in the alternative, set up an IRA funded by gold and silver to protect against the upcoming hyperinflation, or for the younger citizens, set up a college fund if they can qualify for college. That will cure all the consumer loan defaults and restore value to all the derivatives associated with them, revive our manufacturing sector, solve our energy crisis, provide reliable transportation so everyone can get off welfare and go to work, get our kids educated, and set us all up for retirement with inflation-proofing through gold and silver, while pushing trillions in available loan funds back into the banking sector to totally re-grease the system. What the heck is $20 trillion when we already owe $100 trillion? Sure, it's certainly hyperinflationary, but what is the alternative? The alternative is a purging of the system and ultimate decade long depression for the world financial system with a major war as the cure, which the Illuminists will use to destroy our precious Constitutional rights and pave the way for a one-world government. The same will happen if we hyper-inflate, but much further down the line, and you at least get to have one final party together with some gold and silver protection, and who knows, we might figure a way out in the meantime.

You will never see such a plan implemented, because as should be obvious from the $700 billion Paulson Ponzi Plunder Plan, the idea is to bankrupt the middle class, and not to save it, by pumping taxpayer largesse into failed and insolvent banking and business entities so that the dollars are wasted and are used to destroy the middle class with hyper-stagflation, while Illuminist executives walk away with trillions in salaries, bonuses and stock dividends after buying up all the smaller fry in a fresh round of competition elimination. The Illuminists want to play god with your money and decide who lives and dies in the business world. Obviously it is their crony capitalist companies that will survive, while everyone else heads off to see the bankruptcy trustee, who will then auction off all their assets at pennies on the dollar to newly formed and nationalized Illuminist super-conglomerates that will swallow up all the old discarded, insolvent Illuminist companies that have sucked out the value of our money through their black hole of losses. These new super-conglomerates will form the backbone of our new corporatist, fascist, Orwellian police state. As we said, they get the gold mine; you get the shaft. Expecting the Illuminati to do anything that would benefit working Americans is a form of insane delusion.

We are told that the Federal Reserve may cut interest rates another ½% to 1% in December.

Normally, when the Fed cuts rates, credit-card issuers follow suit, resulting in lower monthly payments for cardholders. Rates have generally fallen slightly, but banks and retailers are trying to offset rising costs and loses by raising fees.

Those with less than perfect credit ratings and those with excellent credit ratings are having credit lines cut dramatically. They are raising rates on cash advances and overdraft protection. JP Morgan Chase will start charging a new monthly fee of $10.00 for cardholders who have been carrying large balances for at least two years, while raising their minimum monthly payments to 5% of their outstanding balance, from 2%. Citigroup’s Citibank and American Express will raise such rates 2% to 3%. Amex is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fee to 2.7% from 2% on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards.

Home Depot is reducing credit lines on its in-state cards. Nordstroms and Target are raising interest rates on in-store cards

In the third quarter credit card losses at issuer banks were over 5% of total credit card balances and are poised to deteriorate further. This is why interest rates are climbing and fees are rising. You get penalized because others do not pay their bills. Now you can better understand why we have been telling you for the past eight years to eliminate credit card and revolving debt. It is the most expensive of all debt.

Credit card use in the second quarter fell 5% from the first quarter to $663 million, the biggest drop in several years.

Promotional deals are being done away with or cut back as are reward programs. You will see them in next month’s mailing or you’ve already noticed some changes.

All we can say is pay off those balances monthly as they occur and get rid of debt balances ASAP.

Gerald Corrigan will take over at Goldman Sachs. He is the former head of the New York Fed.

If you do not like speeding tickets stay away from Phoenix. If you live there move. In the first two months of work the state’s new speed cameras have issued 40,000 photo speeding tickets beginning the revenue harvest of $6.6 million.

About 60 cameras are in use. Of those, 40 are mounted on vehicles and 20 are at fixed locations along freeways. Twelve more are being added in metro Phoenix. Across the state they hope to have 100 cameras in use by February.

The cameras capture video and license plate numbers of drivers breaking the speed limit by 10 MPH or more. At 20 MPH over, the offense becomes “criminal speeding.” Of all the violations, 661 have been criminals. The highest speed logged so far was 130 MPH.

Law enforcement say the cameras promote safety. They are wrong, speed doesn’t kill, stupidity kills, and all this represents is another tax on citizens and a boon for insurance companies. It gives them the excuse to increase your rates.

Including surcharges a speeding ticket costs $185.00 and your insurance cost rises $1,000 or more a year. Fascist America marches on.

You can expect a record number of fund closures in 2008. If your fund is on this path get out fast to avoid a potential tax nightmare. Funds can shut down without shareholder approval and when you see them throw in the towel you head for the exits.

When a fund liquidates it sells all holdings and gives shareholders full market value of their holdings.

Typically in an IRA, if they hold the fund on the day it closes for good the fund’s transfer agent will send them the proceeds of their account but will automatically take a 10% federal tax withholding because it considers the payout to be a distribution.

An investor who is eligible to roll the account over or transfer the proceeds directly into another IRA, can only avoid the tax withholdings by selling before the fund liquidation.

Retirement savers can complete some tax paperwork to withdraw the funds without the distribution, but will have 60 days from receiving the monies to complete the transaction or face IRS penalties.

If one of your funds is next to give you the ghost, quickly pick a landing pad for the money, determine the tax implications of any transaction, and call the fund’s transfer agent to see how to handle the change most effectively. Get it done and move on, or you could mourn the loss of your fund – specifically what it cost you in taxes or depleted retirement assets – for years.


We have watched over and over again since 10/19/87 our government dump gold on the market to suppress prices. From 10/19/87 until 8/20/88 that was an illegal enterprise. As we moved into the early 1990s, we saw commercials on the Comex shorting and increasing shorts as prices rose, which is not a normal procedure. It exposes one to the possibility of major losses, unless your shorting is covered by the US government. The result has been suppressed gold prices for 30 years, especially over the past 16 years. These methods have been augmented by the selling and leasing of gold by a large number of central banks. These sales were made over and over again to break the back of any gold rally. Due to overwhelming physical demand over the years gold has still managed to achieve new highs.

During this month of December we see unusual physical delivery of Comex futures contracts. We have been reporting those figures to you as we receive them. The registered gold available at the Comex for delivery is being depleted something that has never happened before. Due to the fact that the CFTC has never audited the registered Comex holdings we really do not know how much gold is available for delivery. If the demand is high default could occur. We’ll know that by the end of the month or perhaps sooner.

A short seller must be 90% covered by gold or by offsetting long contracts. The CFTC is supposed to oversee such activity and if they haven’t then we can assume that the US government is behind the naked shorting of gold contracts without gold as collateral or offsetting long positions. The pros, specs, and traders have seen this going on during 2008 and they have been abandoning the market in droves. Open interest has fallen from 625,000 contracts to 264,000 as a result. Players are tired of being stolen from by their own government.

Normally ½% to 1% of contracts are delivered when the contract expires. Thus far into the delivery month we are seeing about 6% take delivery. Over the next three weeks we will find out just what a fix Comex is in. It won’t be a positive event no matter what happens. Large deliveries will force gold higher and default will send gold upward like a rocket.

Our government needs much higher gold prices to devalue the dollar. If the Fed curtails the availability of money and credit the stock market will collapse, as well will the economy and the Second Great Depression will be underway.

As this transpires we are seeing the beginnings of a trade war as export countries deliberately devalue their currencies, this is a confluence of very bad events. This we believe is about to force the Fed and the Treasury to abandon their gold suppression of many years.

The Fed has to devalue the dollar versus gold - it has no other choice. If it doesn’t everything else, financial and economic, collapses. We are at a great crossroads - the event we’ve been waiting years to see. This is the only way Fed Chairman Ben Bernanke can void many years of depression. He knows if gold goes to $6,000 an ounce, debt will be mitigated and pressure will ease on the economy. This is why we are starting to hear insider Illuminists talk of $2,000 gold. They want to be recognized as having forecast the event and they also want to set a mental barrier at $2,000 an ounce. This revaluation of gold and return to the gold standard will neutralize hyperinflation by absorbing excess currencies. Why else would JP Morgan Chase and Citigroup be predicting $2,000 gold?

We see Morgan, Citigroup, Goldman and Hong Kong Shanghai Bank HSBC, taking large deliveries of gold because they know what is coming and they can buy cheaper on the Comex. The trade is a lock because they take delivery on the futures market and if they want to they can sell on the spot market and take a profit due to massive physical demand. We are close to seeing a great breakout in the gold price. Stand by we’ll let you know when to add to your positions.

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