International Forecaster Weekly

Current Numbers Dont Add Up To Recovery

Unemployment numbers belie the announced recovery, credit card interest still killing consumers, market changes the balance over manipulation, economic recovery not possible without a manufacturing base, dollar abandoned worldwide, a second downturn is forecast

Bob Chapman | October 7, 2009

This past week the BLS released the September unemployment statistics and they worsened as usual, as America enjoys its recovery.

  • Those unemployed 15 weeks or longer, as a percent of the civilian labor force was 5.4%.
  • Job losers and persons who completed temporary jobs, as a percent of the labor force was 6.8%.
  • Total unemployed, as a percentage of the civilian labor force, the official unemployment rate, 9.8%.
  • Discouraged workers 10.2%.
  • Total unemployed plus discharged workers, plus marginally attached workers 11.1%.
  • Total unemployed as a percent of the civilian labor force 17%.
If the birth/death ratio is removed, U-6 is in reality 21.3% total US unemployment. The estimate is that 824,000, more jobs may be extracted from the payroll count for the 12-months ended next March. Such a revision would be the biggest since 1991. The BLS is underestimating job losses deliberately and has been for a long time. That would mean September’s loss would be some 300,000 not 263,000.

Such a revision would put job losses not at 4.8 million but 5.6 million jobs.

This is how government has operated for some time and will continue to as long as we allow them too.

Last week the Dow and the S&P fell 1.8%; the Russell 2,000 fell 3.1% and the Nasdaq 100 fell 1.9%. Cyclicals fell 2.5%; transports 3%; banks 2.8%, as broker/dealers gained 1.1%. Consumers rose 0.3%; utilities fell 2.69%; high techs fell 1.6%; semis 4.5%; Internets fell 1.6% and biotechs 4.1%. Gold bullion rose $12.00, as the HUI dipped 0.7%. The USDX rose 0.3% to 77.03.

Two-year T-bills fell 11 bps to 0.76%, 10-year notes fell 10 bps to 3.22% and 10-year German bunds fell 13 bps to 3.12%.

Freddie Mac 30-year fixed rate mortgage rates fell 10 bps to an 18-week low of 4.94%; 15’s fell 10 bps to 4.36% and one-year ARMs fell 3 bps to 4.49%. Jumbo 30’s fell 6 bps to 6.11%.

Federal Reserve credit fell $12.4 billion. It has fallen $126 billion ytd, but it is still up $742 billion, or 53% yoy. Fed foreign holdings of Treasuries and Agency debt rose $583 million to a record $2.855 trillion. Custody holdings for foreign central banks rose at a 17.9% rate ytd, and $389 billion yoy, or 15.8%.

M2 narrow money supply declined $8 billion to $8.310 trillion ytd and 5.2% yoy.

As the lack of government guarantees become known more money leaves money market funds. Assets sank again $53.5 billion to $3.429 trillion. They have fallen $401 billion ytd, or 36% annualized. They have increased only $30 billion, or 0.9% yoy.

We wonder what House and Senate members think when their constituents complain that banks are now charging 25% to 40% credit card interest? They simply don’t care, because these very same banks are paying off these elected representatives and senators via campaign contributions. That is an extra $700 billion to $1 trillion a year in earnings when the average family is having trouble putting food on the table. Couple this with virtually no income on savings and you have a dreadful situation. Americans are tax slaves to government and debt slaves to banks, a situation that cannot long persist. In addition banks want to charge more and subtly taxes will soon rise again.

Last week we forecast the fall in the Dow at 9,800 and so it has begun. The market has finally overpowered the manipulation of our government. It wasn’t that difficult. A 26 P/E ratio of trailing earnings that should be 14.5 times. The next leg down will test 6,000 to 6,600 on the Dow next year. All those who had a second chance to sell into the bear market will be doomed to greater losses than they experienced this year. It is time to again exit the market and move into gold and silver related assets. The banks and brokerage firms along with insurance companies have been driving this bear market with money from the Fed and the Treasury at 50 times leverage. The correction is underway as all these entities try to exit at the same time. Some are going to end up insolvent. This reminds us of 1922 in Germany and today’s Zimbabwe. Assets on bank and brokerage house balance sheets are going to be devastated. Even they do not really understand the debasement that has taken place. Every chart comparing everything with gold is in a state of collapse and that will become more evident shortly as gold soars to new heights. The mad overvaluation of the markets is about to end. The de-leveraging will take ten perhaps 20 years that is unless we have another world war. Fudging the figures just is not going to work. The PPI is climbing and no one seems to notice, particularly the media. Big inflation is on the way. It will be interesting to see just how much of the price increases businesses are going to absorb. Those on the edge are going to go bankrupt as debt doubles and doubles again.

All this is the result of the machinations of Illuminists who have created a corporatist fascist government for us, which will become the new world order, if we allow it to happen.

How can it be possible to have an economic recovery as we lose more and more jobs and that America manufactures very little. Private banks, Wall Street and insurance companies with vast amounts of wealth control our country, make no mistake about it. This is done by the private issuance of money and the deliberate creation of inflation, deflation and depression.

Inflation started to show up again beginning in May and this past month showed 25% growth in the PPI. That won’t show up in official government figures for the CPI, but it will in part be there. Will the corporations absorb the added cost or will they pass it on? Of course, they’ll pass it on.

Relentlessly the dollar is being abandoned worldwide. Unfortunately, the other G-20 currencies are not much better and that is why gold is so important. Keeping liquidity running into the system hasn’t worked and can’t work.

Our President’s pet group ACORN, a criminal enterprise, has had its funding pulled by the Ford Foundation. Annie E. Casey Foundation, the Charles Stewart Mott Foundation, the Marguerite Casey Foundation and Bank of America. Good riddance to bad rubbish.

The dollar has fallen from $124.00 on the USDX in 2002 to about 76.30 recently and was as low as 75.75 two weeks ago. Incidentally, someone should tell the liars at CNBC gold has risen by 300%. At both G-20 and G-7 summits there was little attention afforded to the plight and future of the dollar.

G-20 was full of the normal gobbligoop by bureaucrats running hither and yon, and accomplishing nothing more than creating a cloud of dust. They said they will maintain the global flow of capital as bank lending fell 14% yoy. Nothing has been done to repair the financial system. It is worse off now than it has been in two years, since the debacle began. In order to repair the system it has to be purged. The banks, brokerage houses, insurance companies and the Fed have to go into bankruptcy. This, of course, means Americans will lose 50% to 95% of their wealth, unless they are in gold and silver related assets. That is the cost of not paying attention, for not making the House, Senate and President do as they should. These so-called leaders have done everything possible to insure that there is no recovery. This while they tell us the global financial crisis is over. In addition the same crowd that created this disaster tells us over and over again that without their untimely and unprecedented support, the system would have collapsed.

You have to laugh at the G-7 and G-20. The latest is that world financial ministers have told the IMF to prepare guidelines to ensure an orderly and cooperative exit from fiscal and monetary stimulus. That can’t happen, because if it does the whole system will collapse. This is the IMF, which is selling gold because they will soon be broke, and haven’t made a correct decision in 60 years. The IMF is to provide insurance-style finance to well run emerging economies so they won’t build up foreign exchange. We have never heard anything stupider in our lives. As this transpired the World Bank’s President, Robert Zoellick, informs us the bank will be broke within a year.

Last month the BLS created 34,000 jobs via the net birth/debt adjustment (ratio). What a fraud. That is double the 18,000 for September 2008.

They are telling you what you are supposed to believe. That story is as believable as the WDO story that started the invasion and occupation of Iraq. Our President tells us Iran has a secret nuclear facility. This is information Iran told the UN’s International Atomic Energy Agency four days previously and miraculously our President discovered it. This, like the meetings of G-20, G-7 and demonstrations, serve as distractions to our pitiful economic and financial morass. This was to be used as an excuse to greatly increase sanctions, which are a form of warfare. All this is misinformation to cover up a two-year old credit crisis that is worsening by the day. Americans and others realize this. That is why spending is falling and savings are rising. This holiday season sales will be off 1% to 3% with the stimulus package. Otherwise they would have been off 5% or more. Recognition of our financial and economic situation has made banks reduce lending. It is obvious credit expansion has reached its limit and that is why lending and spending has slowed.

This all comes back to 8/15/71, the day the US left the gold standard. The only way the dollar can be saved is by a return to the gold standard. Unfortunately that won’t and can’t happen because we do not believe the US has any gold left and even if they did they still wouldn’t have a gold backed currency. They want the destruction of the dollar in order to implement a world currency from the IMF and in that process bring the world economic and financial system to its knees to force us to accept World Government. This is evident in the Illuminist goal to control all political, social and financial freedom. This is all being done by way of deception. The same deceit has been used in the TARP program. The purpose of which was to purchase troubled assets that cluttered balance sheets. What happened instead was that the funds were used to buy the shares of troubled banks and for banks to buy other failing banks and to speculate in markets. Another deception is that the Fed will wind down its monetization program. That is impossible, otherwise the system would collapse. Never mind the secret monetization going on in swaps and in secret Cayman accounts. In all of this saving of banks, Wall Street and insurance companies the public has been left behind and unemployment has flourished. All such programs are doomed to failure and your only protection is gold and silver related assets.

Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said.

The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT on June 6 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares to prop it up at the height of the crisis. The potential loss for taxpayers would be the biggest to crystallize so far from the government’s capital injection plan for banks.

The agreement with Goldman states that if CIT defaults or goes bankrupt, it would be required to pay a make-whole amount that totals $1bn, the people familiar with the matter said.

While Goldman is entitled to demand the full amount, it is likely to agree to postpone payment on a part of that sum, these people added. A CIT filing last week said that it was in negotiations with Goldman concerning an amendment to this facility.

Goldman said: This would not be a windfall payment. The make-whole payment is simply the present value of the spread to be earned over the life of the facility.

CIT declined to comment. In an effort to prevent bankruptcy, it is working on a debt exchange offer that would virtually wipe out equity holders. In the event of bankruptcy, Goldman would reap more than $1bn because it also holds credit insurance that would be paid off.

Goldman said: “The credit default swaps Goldman Sachs purchased to prudently manage the risk associated with the CIT financing are not a directional ‘bet’ on CIT, but were bought to protect against the possibility of a precipitous decline in the value of the collateral.”

Michael Geoghegan, chief executive of HSBC, is so convinced there will be a second downturn in the coming months that he plans to delay any rush to expand the bank.