International Forecaster Weekly

Trillions Have Dissappeared Into The Ether

No winners only losers of asset values, bailouts given to the intentionally self-destructive, shareholder value vaporized, the tip of the iceberg thus far, why do we pay AIG's bills?, indexes continue to report big shrinkages, hyperinflation wont repair anything, questions of credit and capital, what they are and what they are not. A bleaker future painted for younger people.

Bob Chapman | March 7, 2009

Recently, a public radio host sponsored an economics professor from MIT. Since he was the former chief economist for the World Bank, you know that he was an Illuminist mouthpiece, a disinformation specialist for the powers of darkness.  He was asked where all the money went that has been lost by the tens of trillions in various asset classes such as real estate and the stock market.  He was asked if it just disappeared into the ether, and he said basically that this is in fact what happened, like there were no winners, but only losers as the values of assets plummeted.  He does not want you to know about where all the money really went.  
    But we'll be more than glad to tell you where it all went, and that is into the private bank accounts of the executives and employees of Illuminist banks, investment banks and brokerage houses around the world from profits generated by flimflam investment sales, commissions, fees, spreads and government bailout money, all of which was paid out in the form of salaries, bonuses and dividends.  The money represented by these trillions in losses that supposedly disappeared into the ether were also paid to insider shareholders like Angelo Mozillo, who bailed out of their stocks leaving the remaining sucker-dupe shareholders holding the bag, to the shareholders of large financial companies and business corporations that took the form of corporate outlays for dividends and stock buy-backs that should never have been paid because their toxic waste holdings rendered their companies bankrupt, as well as to the sovereign wealth funds of foreign dollar surplus reserve nations who are in alignment with the Illuminati and whose potential "losses" on fraudulent derivatives, which they overpaid for by the trillions (when they are finally marked-to-market), have been backed by the US taxpayers, who are now having all these losses shoved up their collective derrieres.
    All that money that has been lost is now being created out of thin air to fund inane bailouts of financial companies that intentionally self-destructed, or to back or bail out Illuminist aligned financial institutions and sovereign wealth funds who purchased the snake oil derivatives with bogus AAA ratings.  All that money that has been magically created out of thin air via our inherently evil, European-style, debt-based fractional reserve banking system, which was set up in America in 1913 via the privately owned Fed, will now debase our currency further to the point where we will eventually experience Weimar-like hyperinflation, and the final weight of the lost buying power that will be experienced via the stealth tax of inflation will be borne by US taxpayers.
    Of course, when the Illuminist mouthpiece-economist was asked where all the money would come from to fund the bailouts, he just said that the US, via its currency's reserve status, had the privilege of borrowing the money by selling its debt to other nations with dollar forex reserves via treasury bonds.  During the entire dialogue, there was absolutely no discussion about what the ramifications are for taxpayers when their government continues to borrow money that can never be repaid.      Not only will all this bailout money, that is being created out of thin air, fail to get our economy going again, it will also exacerbate a myriad of already insurmountable problems created by the intentional destruction of the world economy by the Illuminati to clear the slate for purposes of setting up a world government.
    If this so-called economist would also disappear into the ether like he claims the money from the losses did, he would be doing us all a favor.  Of course, he could then just materialize out of thin air like the money for all the bailouts, and we would then be stuck with him again anyway.
    Barack "Nero" Obama will now play his Marxist FDR fiddle to the accompaniment of the sound of rolling printing presses while Rome (the US) burns to the ground.  He will now not only save our economy with "hope' and "change," he will save our medical care system as well, while tens of millions of illegal aliens, who work under the table and do not pay taxes, and whose money is largely sent overseas and not spent in the US, continue to bankrupt our public welfare systems and hospitals, including Medicaid.  Those who do not take out their Nero-insurance via gold, silver and their related assets will become crispy critters in the ensuing conflagration that will leave nothing but glowing cinders in its wake.  
    In the financial markets, whenever you have losers, you also have winners.  Someone sold the losing asset to someone else, receiving full value for it before the loss was incurred, with full value often being a fraudulent and fictitious figure calculated with mark-to-model values based on bogus assumptions and even more bogus financial ratings and appraisals.  The winners are always the Illuminist banks, investment banks and brokerage houses who sold bogus paper at full value, and whose executives and employees take all the profits off the table via salaries and bonuses before the losses come back to haunt them when things like SIV's and municipal auction rate securities.  The bailouts are intended to prevent such losses from hitting Illuminist creditors by transferring the losses to the taxpayers, whose government creates money out of thin air to fund the bailout of such losses.  The resulting monopoly money will eventually result in hyperinflation, the collapse of the dollar, the loss of the reserve status of the dollar which the economist chimed about, the downgrading of US treasury bonds, and, via higher interest rates and risk re-evaluation that will become necessary to bring this profligate flow of monopoly money under control, the collapse of the bond market, the real estate market, and the hundreds of trillions in interest rate swaps.  The thermonuclear financial meltdown cometh, so be ready with gold, silver and their related assets.  What has transpired thus far is just the tip of the iceberg that will send the US Titanic down to Davy Jones Locker.
    The never ending story of desperate times, as our government in behalf of American taxpayers, this past week threw another $30 billion lifeline to AIG, the beleaguered insurance giant and CIA front and money laundering operation, that lost $62 Billions in just the fourth quarter.
    We estimated it will cost $500 billion before the bailout is completed. They were insuring mortgage backed securities and other debt against default. Taxpayers have already supplied $17 Billion.
    There is no question AIG has become a bottomless pit and it is illegal and unfair for the American taxpayers to foot their bills. Essentially AIG is holding the government at gunpoint. You either bail us out or the system collapses.    What makes matters worse is government really does not know how the money is being spent.
    The “Second Great depression” began on 2/01/09.
    We expect the Dow over the next few years to go to 3,800 to 4,200, if we are lucky. If we replicate what happened in the “Great Depression” the Dow will go to 1,260 to 1,450, an 89% retracement.
    Here and on radio we have been warning you that many insurance companies will go bankrupt unless the government steps in to save them. The stock of almost every company has been falling and some severely. If you have cash values in life policies or annuities you might cash them out and put the proceeds in gold and silver coins and shares. For those who have to have insurance, use pure insurance, term insurance also known as mortgage insurance.
    S&P/Case-Shiller index says, prices in twenty US cities fell 18.5% on December Y o Y, the fastest drop on record. Sales of existing homes, which account for 90% of the market, fell in January to the lowest level since 1977, and new home sales were the lowest since 1963 when records began.
    Each day it becomes more evident that the call for tariffs and subsides are getting louder and louder. Politicians are coming under increasing pressure from constituents to in-act protectionist laws, and rightly so. Free trade, globalization, off-shoring and out-sourcing have destroyed our industrial base. A revolt is coming and coming fast. Next year we will see legislation, perhaps sooner. Never before, even under British mercantilism has transnational conglomerates, from the US, Europe and Japan developed their manufacturing base on the soil of another countries in such a massive scale to make extraordinary profits, keep their profits free from taxation in offshore banking centers and at the same time destroy the core manufacturing of western countries. The end of globalization would bring the US and others back to life, and once under way will exert major pressure for higher gold prices.
    How can investors have any faith in corporate America? At Pacific Brands Solomon Trujillo received $20 million as he left the company and the board gave themselves raises as workers were being thrown out on the street. This is a scene reminiscent of “Annie” and the infamous “Daddy Warbucks.”
    As this transpires it looks like the US 2009 fiscal deficit will be close to $2 trillion. That as CDS default swaps on US Treasuries rise 100 bps or $100,000 for insurance on a $10 million five year Treasury note. It cost only $5,000 to do this a year ago. We do not see a default yet, as government will print money and float more debt. The loss will be in the form of inflation. Most all of the Treasury’s financing is short-term, which is a very vulnerable position. In fact recently the 30-year bond was reintroduced and we’ll have 7-year Treasury notes, which we haven’t seen since 1993. As we have reported previously it won’t be long before government borrowing crowds out lending to the private sector. The only way to avoid that is to have the Fed buy and monetize the debt and create hyperinflation and that is a work in process. As Ron Paul told Ben Bernanke recently, “credit is not capital.” You cannot recapitalize the banking system by printing more money or extending credit. Credit and capital should come from savings, not from raising a magic wand. We need 15% savings, not the current 2.5%. Once you see savings over 10% you will know we’ll be ready to exit depression. Banks will be ready to expand by retaining earnings, increasing deposits, by writing off losses and then by making sound loans.
    We will remain in depression until this can be accomplished. Waste, errors and maleinvestment have to be cleared off the decks. As long as government and the Fed and other central banks bail out banks, financial firms and others we will have hyperinflation and repairing the system will not be accomplished. A depression is a health-restoring event. It purges the system of excesses.
    The ADP job loss report estimate of 697,000 was much worse than the expected fall of 525,000 and the largest loss since 2001. Worse yet, the January report was revised from 522,000 from 614,000.
We saw the president of GE on CNBC Thursday morning telling the world what a wonderful company he runs. For his efforts the stock traded off $0.03 to $6.66. We recommended a short at $33.49. GE is another Enron, AIG, etc., one of the biggest users of credit default swaps, a large package of toxic garbage.
Moody’s may cut ratings on Wells Fargo and JP Morgan of which we are both short.  Their derivatives are blowing up. Their troubles are in the trillions.
The 466 companies in the S&P 500 have reported a 58% fall in earnings on average.
On Thursday JP Morgan Chase fell $2.70, a new low, to $16.60. AIG lost $0.08 to $0.35 per share. Citigroup fell $0.11 to $1.02. Wells Fargo fell $1.59 to $10.55 and Bank of America fell $0.42 to $3.17. We are short JPM $39.36; C at $44.10 and WF at $59.65. The blue chips are getting crushed and you haven’t seen anything yet. A 4,000 Dow is a lock. The question is will it hold there”? Honestly, we do not think so. The damage is so extensive it could take ten years for the market to recover. Thank goodness I’m not still a broker. Gold was $255 in June 2000 when we started this odyssey and we are still a long way from being finished. The elitists will be lucky to just end up in jail and lose their ill-begotten wealth. Why do you think the intelligent people in the world are buying all the gold they can get their hands on? Gold is the only safety net, the only way out.
Our government calls U6 unemployment at 13.9%. We are now calling it at 16-1/2% and it is accelerating.
Commercial paper issuance outstanding fell $44.2 billion, to stand at $1.480 trillion. That is down from $2.2 trillion 21 months ago.
Unsecured financial issuance fell $35.9 billion, the biggest drop since a record $93.5 billion five weeks ago.
The FDIC is considering lowering special assessment on banks to 10 bps from 20 bps.
Blackstone (BX), which we shorted at $38.00 has written down to zero the value of billions of dollars of LBO debt that it bought from Deutsche Bank last year.
Private equity/LBO debt is the unspoken catastrophe waiting to happen to bank balance sheets and pension funds. The highest bid for any of it is $0.70. Banks are sitting on hundreds of billions of it as well.
You heard it here first. The entire private equity industry is going to get wiped out and with them the banks and pension funds will be injured as well. Many corporations will get hit as well, such as GE Capital.
The President’s Stimulus Plan has brought little confidence or trust to the market. CEO Magazine’s Confidence Index, broke its own record for the third time in the past four months, 95% rated the current business and employment conditions as bad; 69% don’t expect improvement anytime soon and 77% expect unemployment to worsen over the next quarter.
S&P says that credit quality continued to deteriorate with downgrades leading upgrades 49 to 6 in just the first three weeks of the month. Thus far first quarter downgrades outpace upgrades 14.3 to 1. This will be the worst quarter on record. It was 8.9 to 1 in the first quarter of 2008 and 14.1 to 1 in the first quarter of 2001.
There will be lots of analysts, economists and stockbrokers out of work soon. We estimate 70% will lose their jobs. They will lose 75% of their clients’ assets, as a result of staying the course and telling their dumb clients you don’t have losses until you take them, which is idiotic. They are looking for the rebound that will never come. The feast presented to the financial industry by the de-regulation of the banking industry and the lack of regulation of the derivatives industry is drawing to a close. It is only a matter of time before we get Glass-Steagell back. The greedy crooks in banking and Wall Street are about to be faced with payback. Once we hit bottom and no one knows where that will be, we could drag along the bottom for ten or more years. Recovery depends on whether the Illuminists ‘ arrange a war for us, as they did in 1941 with WWII. Once the Dow reaches 4,000 we will give you a better idea of where we are headed. It is wake up time. Our standard of living will fall 50% or more. We will revert to a lifestyle that we grew up in the 1940s and 50s. Many will have to walk a mile or two to school in rain and snow. No more bus rides. All those McMansions may become boarding houses. There will be 1 TV in the home and one used car in the garage. Credit will be difficult to get and home purchases will have to be accompanied by 20% or more down.
The business of living from paycheck to paycheck will end. 600,000 or more people are losing their jobs every week. Many have lost high paying jobs, jobs that may never be replaced again. These big hitters are taking any kind of job they can get to put food on the table to delay the inevitable exhaustion of savings. There will be many unhappy people. As a boy in the 1940s and 50s I heard thousands of stories of the depression and hardship. It was still in everyone’s minds. Everyone had a very sad story. Today after making $30 or $100 an hour, $12.00 an hour doesn’t cut it. More than 100 million Americans will be flat broke. This is going to be a tragedy of epic proportions. This is why we do 20 hours of radio programming a week to warn and prepare people for what is happening to them.
A major assist has to come from trade tariffs on goods and services. That at least will keep slave labor goods from flowing into the country. We will no longer have to compete with countries that subsidize industry or perpetually lower the value of their currencies.
Young Americans face a bleak future. The bright, strong and hard working will survive and eventually prosper. We did, so you can.
What is going to make the difference between the have’s and have nots are dehydrated and freeze dried foods, a water filter and assault weapons. After those items are looked after next is the accumulation of gold and silver related assets. You must have gold and silver coins if you have excess funds. Your very survival will depend on them. You will have to help other members of your family and friends who wouldn’t listen, graciously. Not everyone is as smart as you are. You have a gift and you must share it. That will allow those around you to survive and will lead to future success for your children and grandchildren. All the value in assets you lose will be offset by your ownership of gold and silver. Some of you may become very wealthy, but that is not what this is all about. It is about preservation of life and capital.
In just three months the phenomenon of states rights, the 10th Amendment, has become a major issue across America. Scores of states are in the process of introducing bills and resolutions declaring their sovereignty over the president’s actions. This is in reaction to massive public outcry of the faux-stimulus legislation and all the federal strings attached, which directly strips states of their rights under the constitution. States have begun refusing all or part of the stimulus money because of the constitutional infringements and additional unfunded liabilities they impose on the states.
This is now known as the 10th Amendment movement, something we’ve talked about since the 1960s but few were listening. It is a grassroots, conservative movement to defend the separation of powers as originally set forth by our Founders in the Constitution. This movement is going to eventually stop federal usurpation of power and deal the Illuminists a mortal blow. The actions of our president and Congress betray a transformational liberalism known as Marxism that should put every thinking American on notice.
It looks like the big hitters are hiding in Goldman Sachs, IBM,w and Google shares. Their charts are almost identical. Wait until  GS breaks, then all three will break.