International Forecaster Weekly

Patriot Act II

George W. Bush signed the Patriot Act II into law on Saturday, which virtually never happens, under the cover of the capture of Saddam Hussein. Passage of the new Act made the middle bottom of page 63 in the newspapers and television and radio never carried the issue. Saddam was front-page news. It was more important that the American people see his tonsils and watch as his hair was probed for lice than it was to let them know that the FBI can pull all your financial history without a warrant.

Bob Chapman | January 8, 2004

(We only print excerpts from)

Since March 2001, consumers continued to borrow in spite of the recession. Household liabilities to net worth hit an all-time high of 22.6% in the first quarter of 2003. Outstanding consumer credit, mortgage debt and other debt hit $9.3 trillion by April 2003, up from $7 trillion in January 2000. Most consumers have cut monthly mortgage payments by refinancing sometimes more than once. Their home has been their piggy bank. Of course, Wall Street, government and media does not find consumer debt threatening as personal bankruptcies rise to historic highs. Even if employment increased 100,000 a month, for the next six months, it wouldn’t change personal financial situations much with inflation eating away purchasing power as wages lay stagnant. In 2004, interest rates have to rise and that will bring consumption gains to a halt. There is a bubble out there and it is only a matter of time before it bursts. Disturbingly, nearly one-third of bankruptcy filers owed an entire year’s salary on their credit cards. Yes, borrowers deserve 30% of the blame, but banks deserve 70%. Fifty percent of the loans they are making and credit they are dispersing should never have been made in the first place. Those fatter mortgages to buy suburban homes in better school districts will come back to haunt many homeowners, especially when you are using two incomes to qualify. All that poor lending by banks doesn’t stop them from issuing more credit cards. We still get five offers a week.

George W. Bush signed the Patriot Act II into law on Saturday, which virtually never happens, under the cover of the capture of Saddam Hussein. Passage of the new Act made the middle bottom of page 63 in the newspapers and television and radio never carried the issue. Saddam was front-page news. It was more important that the American people see his tonsils and watch as his hair was probed for lice than it was to let them know that the FBI can pull all your financial history without a warrant. Saddam has been supposedly caught, but you are a potential terrorist. In passing the Act, the Senate did so with a voice vote to avoid individual accountability. They allowed probable cause to become history. Worse yet, our Congress and President prevented any financial institution from informing its clients that their records had been surrendered to the FBI. If they do so, they will be charged criminally. There is absolutely no transparency in what the FBI does when using National Security Letters. We are now entering an era of political repression because history shows us that if you give these agencies this power they will abuse it. All dissent will be repressed. If you speak ill of government, in any way, you will be considered a subversive terrorist and you will be silenced. That is why we are under cover. Needless to say, both Patriot Acts are unconstitutional, but such a rifle doesn’t bother the elitists as they surge toward one-world government. Again, we experience the Bush stealth legislative strategy to increase executive and federal police power with little public debate. There is no question these acts constitute a constitutional coup.

Arizona has a new state law, that men between 17 and 25 years old will be automatically registered for selective service whenever they apply for a driver’s license or state identification cards. Thirty states now have similar compulsory sign-ups for draft age men. Such legislation is all about power and control. It makes the state an arm of the federal government and it could prove to be a powerful controlling act. Of all the changes of the last 60 years the most frightening is that of the growth and control of our federal government. The family unit has been destroyed and replaced by government programs and distrust has swept our land. A land where few of us know each other. This kind of legislation denies individual freedom and imprisons us. Evil does not come in one fell swoop, it comes in inches. This is part of the intent of total control. We Americans are frogs in hot water waiting for the boil. Laws are enslaving Americans and subjecting them to a fascist-socialist government. Of course, you are told if you do not have anything to hide, then why should you worry. In 1936, it was show me your papers. Next, it was a yellow-star on your sleeve. In a free society, no one should ever have to show their papers. We have voluntarily submitted to tyranny. Another operative phrase of Orwellian speak is, you want to cooperate don’t you? Our answer should always be no. We are presumed to be innocent until proven guilty. If you show your papers or cooperate, there is a good chance you will be destroyed. The politicians, bureaucrats and elitists don’t do this. They are exempt and free to do as they please breaking our laws everyday and getting away with it. The federal misuse of driver’s licenses extends the control of the fascist state. Next will be the national ID and then the implanted chip. America do you get the message? Your life and your soul will soon belong to Lucifer whether you like it or not, because you refuse to fight back. There is little difference between ID cards and chips and shackles and chains. They all represent human bondage. They signify we are slaves to our elitist masters. Is that what you want? You had best start thinking and praying because world servitude is on the way and you let it happen.

The new aggressive approach to security is threatening chaos in international flights to the US – with planes being refused permission to land or diverted for re-screening of passengers and cargo. This, of course, is to continue to make the public believe that there are terrorists in the process of trying to blow something up. They have airliners returning to home airports that are in mid-flight and, of course, nothing is found upon inspection. F-16’s are shadowing flights as well. Where were they on 9/11? Airlines cannot operate profitably under these circumstances and will eventually be nationalized. Then you will see fares head skyward. America can kiss its tourism goodbye. That is game over.

Over the past two months, home sales have fallen 9% from September’s peak and the inventory of existing homes has risen from 4.3 months to 5 months in just those two months. Those figures though are still 6.9% over last year. The question is, are we correct in looking for a 1 3/8% increase in rates? We believe we are. If that is so then the housing market will continue to ease, as will prices. In November, house prices declined and that marks the fourth straight month where prices did not rise and the decline over that period was 6%. Needless to say, high real estate prices are aided by high stock prices, which are aided by low interest rates and our government’s rigging of the stock market in a way similar to the Fed’s manipulation of interest rates. Because mortgage rates have stayed between 5.8% and 6% over the past four months, new home prices rose 10% in just October and November and that was directly caused by low interest and mortgage rates. Sales have begun to recede by 5% and unsold supply is up 7.4% from last year. One of the reasons new home sales are so robust, other than low mortgages rates, is that our government gives first time buyers a gift of $5,000 to make their purchase which you get to pay for. That is accompanied by a 3% down payment and if you are from a minority, you put nothing down. Over 40% of Fannie and Freddie’s mortgages are in this sub-par category. We do not believe the Fed is about to raise interest rates, it is an election year, but we do believe as the dollar falls less money will come from foreigners to buy US assets and that will drive interest rates higher as well as drive inflation higher. The employment market over the next nine months will only improve marginally, perhaps by 50,000 to 100,000 jobs a month. In just the last month, those who said they would buy a new home over the next few months diminished from 2% to 1.4%. That means renewed pressure on house prices. Don’t forget also inventory has risen from 4.3 to 5 months, so in addition the unsold overhang is greater. It is also significant that for the past week new mortgage applications were off 7.5% or minus 25.4% over the past month and minus 45.6% year-to-year. The refinance index was off 7.9%, the second lowest reading for the year and applications are down 53.5% year-to-year. Refi’s’ have been supplying over $250 billion to the economy yearly from the past 3 1/2 years. That money will no longer be used for consumption because it will no longer be borrowed. That means consumption will plunge or the Fed will have to take its money creation machine annually from $1.3 trillion to $1.6 trillion, which is very inflationary. There I now no question in spite of the tax dividend and Fed printing, that the housing market has peaked and is headed down. That slide will be moderate in 2004, get worse in 2005 and avalanche in 2006.

We finally saw the big breakout we have been waiting for. On 1/5/04 February gold closed at $425.00, its highest since the summer of 1988 and silver closed at $6.22 an ounce. Both have created breakaway gaps. The move upward was assisted by crude oil that surged $1.24 a barrel to $33.78 and Fed Governor Bernanke’s idiotic statements. Gold has broken one technical barrier after another, which tells us technical barriers do not exist. You have not seen anything yet. The fireworks have only just begun. Silver closed near its highs. The professionals have the market to play with and the investors do not understand what is going on. Worse yet, the newsletters have recommended trading and millions have already sold their gold and silver shares, only to be left behind again. These moronic letterwriters have cost their subscribers millions of dollars. The hedgers and derivative writers are getting killed and soon there will be an explosion of short covering. The wild ride hasn’t even begun yet. We still are in Phase I. In addition, it is highly unusual that a Fed governor, like Bernanke, would discuss gold. His reference to geopolitical tensions is ridiculous. That has not been a factor in gold’s price since 1988, because every time there was an event the ESF, Exchange Stabilization Fund, stepped in and suppressed gold prices. What the Fed and the Bush administration do not want to admit to, nor for the public to realize is, that the CPI figures are rigged and gold is telling the world inflation isn’t 2% in the US, it is 7 1/2% to 8%. This deadly exposure makes every figure coming out of Washington suspect. The Fed’s wanton creation of aggregates represents one of the main reasons the dollar is declining. Lets let the public think geopolitical tension is causing this and not the Fed’s moneymaking machine. The Fed is the problem so let us blame it on something else. The Fed may be the cause, but they are assisted by the fiscal profligacy and perpetual wars of the Bush neocons. Inflation is rampant and the public is being lied too. What is worse is once inflation peaks again at 13% a couple of years from now the world financial system will collapse. Next, interest rates will rise, real estate and the market will fall, and gold and silver will go even higher. The gold cartel has lost control and the final game is underway. The final blow will be the collapse of the interest rate derivative and gold derivate markets. The Plunge Protection Team is running the stock market up so investment interest will be diverted from gold and silver. They cannot allow the public to realize what is going on. We are embarking on the greatest bull-run in the history of the market and if you are not involved you cannot win.
China will issue 44 commemorative coins in 2004. Twenty-two of the 44 will be minted in gold, 19 in silver, two in platinum and one in palladium.

Technically the implications of a clean break in gold up and over $414.00 an ounce has tremendous short and long-term implications, particularly because the breakout was attained so easily. The breakout has a truly profound effect on future gold prices. We forecast gold over $400.00 and silver over $6.00 by the end of 2003, and fortunately, we were right. Absent any major untoward events, $512.00 gold will be as easily taken out as $414.00 was. That should happen over the first six months of 2004. If we see gold clear $680, and with a move to $840, we will have reached the end of phase one of the 3-4 phase cycle. Cycle 2 will be from $840 to $1,600 and phase 3 from $1,600 to $3,200. If we are in a depression when we reach $3,200 or higher you would want to hold your gold related assets because there would be no viable alternative. Professionals won’t enter the market until gold has cleared $840, and the public won’t discover gold until it clears $1,600. Get long gold and silver coins and shares. We like American Eagles, American 20s and silver bars and bags.

The government has confirmed that the Secret Intelligence Service, MI6 organized Operation Mass Appeal, that has been at the heart of a propaganda campaign planting stories in the media to sell the public the big lie that Saddam Hussein had WMD. This revelation should put Tony Blair in his place and expose him for the pathological liar that he is. This was part of a long-term plan of vilification of Iraq and Saddam Hussein, which started in the late 1990s. The Lord Hutton report is due shortly and if not altered, will show that Dr. David Kelly, the government weapons expert, was murdered as we reported upon his death. This could be another bombshell that could blow Tony Blair out of office and destroy George W. Bush’s megalomaniac plans for the Middle East and world domination. Scott Ritter had previously exposed that MI6 recruited him in 1997 to help the propaganda effort. Numerous meetings were held discussing ways to manipulate intelligence material. The aim was to convince the public that Iraq was a far greater threat than it actually was. Ninety percent of what MI6 produced was his. Hutton’s report is due this month. The using of MI6, as a “back channel” for promoting the government policies on Iraq was never discovered during the Hutton inquiring and it will cause great disquiet among MPs. As you can see the invasion of Iraq was a financial scam and an economic diversion as we described it would be long before Blair and Bush pulled it off.

Mexico imposed a 50 % tariff on imported Japanese autos as of January 1,2004. This could kick off a trade war. The Japanese refuse to cut farm subsidies. This should get their attention, because it shuts them out of the Mexican market.


Rather than go into all the reasons we will just say US relations with China are fair to poor. The latest ratcheting up of trade tensions, US demands for a revaluation of the yuan and 7 anti-Chinese bills in the congressional hoppers, have disturbed the Chinese. As usual, the question of Taiwan is a powder keg. China’s ultra cheap labor is burying the world. In many items they manufacture they have driven prices down 50% to 90%. Yes, that is right. Take air conditioners going from $700 to $120 – are you getting the message. The US created the problem by instituting free trade. Now China instead of moving the yuan up has decided to peg its currency against a basket of 10 currencies. The Chinese are opening up to transnational corporations, but they are tightening credit restrictions. The Chinese government is still communist and they could care less what the US thinks. They will take the exports as long as they can get them. The Chinese will never revalue, if anything they will devalue, which means legislation will be passed to initiate tariffs. That is why we expect the Chinese to continue to sell dollars and buy commodities and gold. China has overcapacity, faces a falling dollar and a world depression. They will devalue, not revalue.