International Forecaster Weekly

Just The Early Stages of Economic and Financial Collapse

further declines in real estate, banks bankrupt, lower class, middle class, and upper class borrowers are all in trouble now, plenty of pain ahead for all lenders and borrowers, Little in loans whether it be bailouts or personal loans will ever be paid back

Bob Chapman | January 21, 2009

The real estate crisis is probably about 40% over. They’ll be further declines, residential and commercial, and then a basing out period that will take several years. The injection of cheap interest rates and a stimulus package of $825 billion are going to temporarily delay the downside. Instead of ending in 2011 it could extend to 2012.

Citigroup is bankrupt. Its 4th quarter loss was $8.3 billion. Bank of America posted its first loss since 1991 of $1.8 billion. One day they requested $10 billion from the government. The next day it was $20 billion.

Citigroup is being dismantled as a failed financial supermarket. Sanford Weill who created this monster some years ago created a total failure. That is why we recommended a short on the stock at $44.10. In order to keep this loser business a new bad bank is being created to dump all of Citi’s mistakes into. Those would be toxic securities and worthless derivatives. That is $850 billion of Citi’s $1.95 trillion of total assets. What a disaster. Almost half their assets are near worthless, something we pointed out 3-1/2 years ago. Government has already sunk $45 billion into the bank and backs $301 billion of its toxic garbage and securities. Citi is a major shareholder in the Federal Reserve.

Bank of America has now received $45 billion with guarantees on $118 billion of toxic waste. It too is a Fed shareholder and it too is broke.

There is now no question that all the legacy or money center banks will be merged into one nationalized bank, which we believe was the intention from the beginning. This will make it easier later in the formation of a One-World government to merge US banks into a world bank that will disperse a world currency. Government is going to take an ever-increasing role in bank ownership and in credit policy, as would be expected in any fascist government.

We are still in the earliest stages of an economic and financial collapse, which was deliberately engineered to bring about eventual total control of our economy and financial system. Except for government and the Fed, Wall Street finance has been incapacitated. The government and the Fed are left to do as they please. Our bought and paid for Congress will rubber stamp anything handed to them. Bank credit will surpass $1 trillion this year to keep the elitist banks solvent and to delay the forces of deflation and depression. Overall credit expansion will expand to $2 trillion plus as many more banks, brokerage houses, lenders, insurance companies and illuminist corporate giants are served up all the cash and credit they need to survive. Very little will ever be paid back. Once the grip of the Fed and our Treasury is complete it will be almost their sole responsibility to extend credit. The excuse will be it has to be done to save the system as they chip you and give you a debit card and set up currency and exchange controls, devalue the dollar and institute wage and price controls. We then become wards of the state. They have allowed the banks to get into such awful shape, that they will tell you that they and America have no other option but to have government and the Fed mandate what will be done to save the system.

These conclusions can only be reached if you understand the powers behind government, their history, and what their goals are. This is why we have been able to predict what has been going on for years. Very few writers understand and many choose to keep their month’s shut because they fear for their lives. This has been an almost 50-year odyssey for us and we refuse to hide the truth. If you do not understand the history of the Illuminati you are in a quandary. It is the missing link that ties all the events together. You cannot use macro analysis without knowing the history of what these evil butchers are up too.

We get the question – why was Lehman Brothers allowed to go under? This was a seminal event in US and global finance. It had to be done to take the system down even though Lehman’s owners were ultimate insiders. Why do you think you do not hear a peep out of Wall Street? It is because the key people in the key firms are in on it and taking orders - that is why. In the blink of an eye trillions of dollars were lost. That amount of money is meaningless when you own the system. You can just create more. It is the power to create and control money and credit that always wins the day. The loss of confidence and trust now worldwide was deliberate. It allowed central banks and governments to totally control their fiscal and monetary systems. Essentially there was no one left to do so. Within the financial community those who understand what is happening dare not say a word or they’ll lose their companies or their lives. That is why there is no opposition from within. ow can any thinking person p;ut their trust in a government or a p;rivate Fed that has gotten us in war after war.How can any thinking person put their trust in a government or a private Fed that has gotten us into war after war and one financial debacle after another be trusted? They can’t be trusted. They are the enemy. Think it through and you will get it. Read the “Creature from Jekyll Island” by G. Edward Griffin and other books we recommend and you will finally understand what is being done to you and who is doing it. The most corrupt people on earth. The ability to print money and create credit is the ultimate power. It allows you to control everything.

Today we have allowed our government and the Fed via our elected representatives to use money and credit to control our financial system. These deficits and guarantees will not be sufficient to stabilize and save our current financial system. Hyperinflation will rage and depression will ensue. Out of this the elitists hope to create their World Government while the world is financially and economically on its knees.

First will come repudiation of debt via default and devaluation. Then a new national currency to be followed by a world currency, followed by a chip or a debit card. Everyone throughout the world will be controlled. If you say or write anything negative regarding the New World Order your chip will be disabled or your debit card will be disengaged. Then you become a fugitive to be hunted down and exterminated. This is what is in store for us. This is what these people are up too. This isn’t intrusion, this is dictatorial government and this is where we are headed.

The answer is clear and we saw this year’s ago. The financial system is to be collapsed in stages that are manageable. You are seeing that in part with the collapse of the financial sector and the securities of these companies. This is caused by eventual government and Fed control of and nationalization of the financial industry. This will be followed by the collapse of stock markets worldwide.

This is not gloom and doom…. This is reality and the truth. The financial system will not stabilize. It is being deliberately changed. The Treasury is crowding out corporate borrowers in their quest for liquidity, as corporations rush to raise what funds they can to allow them to keep functioning and so that they won’t be absorbed by an elitist mega-company of our new corporatist state. At the same time municipalities are raising all the money they can to keep from going under having far overextended themselves.

Don’t be fooled by the respite you will see over the next nine months. It won’t last. It will be a consolidation period. Government and the Fed will be planning their next moves, as the stock market moves lower, along with bonds as long dated interest rates move higher. If you wanted to refinance do it now. You will never get a better opportunity.

The crisis is here and ongoing. The financial stocks are telling us there is a rocky road ahead. If the market was going to rally it would have already happened. It tried to breakout over Dow 9,000 and was unsuccessful. Underlying everything are lies, corruption and acute stress not visible to the public. Even many old Wall Street types do not get it and that is because they refuse to believe the actuality of what is happening behind the scenes. Those behind the scenes know full well what is going on and they are not going to fill in the rest of Wall Street, banking, government and corporate America that do not have a need to know. Housing will fall another 10% to 25% dependent on area and circumstances and more and more foreclosures will hit the market, as millions of jobs are lost. In addition, the entire world will experience this process, which worsens the situation. There is still de-leveraging to be dealt with along with the monstrous derivative problem. Focus has to be on wealth preservation and safety of person and assets. The core is your water filter, freeze dry and dehydrated food, family protection and gold and silver related assets.

The subprime and ALT-A borrowers will have reset or fallen by the wayside by the end of June. Now those in trouble are not lower income borrowers, but middle-class and upper-middle class homeowners. Some own Option ARM-pick-and-pay loans they cannot now afford or homeowners who never thought they will lose their business or get laid off. We do not see the downside nightmare hitting bottom until 2011. It may well be later due to trillions of dollars in artificial stimulus. About half of borrowers are under water and all are seeking a break from their lenders. The lenders are making few concessions. There are now no stereotypes, anyone can become a victim.

The Option ARMs are clustered in California, Arizona, Nevada, and Florida and outside the Washington, DC area.

On top of these underlying mortgages are unemployment and crashing home prices that have left a great percentage of homeowners under water.

The latest statistics we have show long-term unemployment at 17.8%, intermediate U6 at 13.8% and the phony government media figure at 7.2%. In one of the hot spots we estimate U6 to be near 16%. In 2005 and 2006 this region saw construction make up 11% of the job base.

There are many formerly prosperous people who had equity, no debt, great FOICs who have lost jobs, closed businesses, have no equity, just debts. They have maxed out the credit cards and gone through all their savings and retirement.

There are lenders who are making deals to help homeowners, but not many.

Some borrowers walk away in spite. The home next door is in foreclosure and is selling at a deep discount, which in turn put the neighbor under water. It feeds on itself.

Then there are those who refuse offers. Many of them just do not like owning their own home.

All we can say is there is plenty of pain ahead.

The players who made this all possible, the Fed, lenders, rating agencies, mortgage originators, appraisers, salespeople and buyers are for the most part walking away. The buyers and lenders are stuck, but government is bailing out the lenders not the buyers. The rest are going out of business or losing their jobs. The exception is the rating systems.

The raters, S&P, Moody’s and Fitch were the key to the biggest economic and financial calamity since the Great Depression. Why didn‘t we have criminal charges brought against these crooks or at least civil action? These miscreatants gave complex, opaque toxic mortgage-backed securities AAA ratings when they knew they should have had BBB ratings, in conclusion with the Fed and the lenders. This stamp of approval allowed other crooks to market destructive securities worldwide. Some would have us believe that putting a financial floor under these players would solve our problems.

That is not the way it works. Bailing them out accomplishes nothing. It just extends the problems into the future.

The raters now very concerned are sending credit warnings to governments, threatening to downgrade their sovereign debt ratings if they allow their fiscal deficits to increase too much. As a result Greece has had their rating lowered and Portugal, Ireland and Spain have been warned by S&P to fix their public finances or face downgrades. This increases the cost of raising funds and is taken as a signal to avoid these securities. Next is the UK, US, France and Germany. This is lose-lose for all sovereign nations where tax revenue is falling, social spending increasing and stock and real estate markets collapsing. No professional should be surprised at these results. We forecast all this six years ago. Of course, no one wanted to listen.

The tact that has been chosen is one of disaster. Lowering ratings at this stage is an exercise in futility. The world financial system has deliberately been destroyed. The only real question is when will hyperinflation end and read deflation take the advantage and flatten the system?

It will take $2 to $5 trillion to bail out America’s banking system and in the process nationalize it. Government is the only entity capable of bailing out the banks. Do not expect the Obama team to stop the bailouts – they’ll just demand a little more equity. What should have been done is that these crippled financial companies should have been allowed to fail.