Banks Will Still Profit in this Faltering Economic Recovery

Bio: Mr. Chapman is 72 years old. He was born in Boston, MA and attended Northeastern University majoring in business management. He spent three years in the U. S. Army Counterintelligence, mostly in Europe. He speaks German and French and is conversant in Spanish. He lived in Europe for six years, off and on, three years in Africa, a year in Canada and a year in the Bahamas.

Mr. Chapman became a stockbroker in 1960 and retired in 1988. For 18 of those years he owned his own brokerage firm. He was probably the largest gold and silver stockbroker in the world during that period. When he retired he had over 6,000 clients.

From 1962 through 1976 he specialized in South African gold shares. He and his family lived in Salisbury, Rhodesia (now Harare, Zimbabwe) and Johannesburg, South Africa from 1970 to 1973. During that time he did a great deal of further study into the South African mining industry.

Mr. Chapman belonged to The Traders Association for 25 years. He did all his own trading. During his South African years some was done directly through Johannesburg, but 95% was done through London brokerage firms. Hence, he has extensive contacts, both in London and on the Continent.

Starting in 1967 Mr. Chapman began writing articles on business, finance, economics and politics having been printed and reprinted over the years in over 200 publications. He owned and wrote the Gary Allen Report, which had 30,000 subscribers. He currently is owner and editor of The International Forecaster, a compendium of information on business, finance, economics and social and political issues worldwide, which reaches 10,000 investors and brokers monthly directly, and parts of his publication are picked up by 60 different websites weekly exposing his ideas to over 10 million investors a week.

In 1976, after the Soweto riots, Mr. Chapman began buying North American shares exclusively for his clients. Up to that point only a handful of American and Canadian issues interested him, due to the high dividends the South African shares had paid out over the years. Between 1976 and 1988 his business surged from 1,000 to 6,000 clients, so the bulk of his business ended up being Vancouver Stock Exchange issues. For this reason he is very conversant with the quality of management, geologists, properties and traders on today’s North American scene. He is well known.

From 1976 to present he has spoke and given workshops at over 200 business conferences worldwide, and has been on radio and TV hundreds of times. Until his retirement he was always judged by the attendees to be one of the top three speakers and never once was lower than first in workshops due to his vast knowledge of the mining business and his grasp of worldwide financial markets and political scenes.

In June of 1991, at the request of business associates, and due to retirement boredom, he began writing the International Forecaster.

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All I have to say is thank god he got bored.  Now for the good stuff, his column   : )

Bob Chapman
The International Forecaster
August 20, 2010

When government interferes with free markets they cease to work properly. Measures that interrupt and manipulate distort markets on a short to intermediate basis, but the final result is never in doubt. Things are altered but only little changed. What is serious about intervention is that it breaks the social and political contract between government and the people. This is the type of social engineering and pragmatism espoused by John Maynard Keynes, which brings us to where we are today. If Keynes were still alive he would witness the failure of the system, he was instrumental in creating it. Keynesianism is in part economic theory, but its real goal is the social-governmental manipulation of markets intended to concentrate government power in the hands of the corporate few producing corporatist fascism as the final economic and financial power under such a system and the final implementation, which ends in the brute force and the manipulation of laws for its completion, which is totalitarian government. http://en.wikipedia.org/wiki/Keynesian_economics

Keynesianism is part of the quest for power, commercial and political, which was attempted in Italy and Germany in the 1930s and 1940s. You might say this was the modern testing ground, financed and abetted by internationalists sources in London and New York. When these sources attempted to ensconce General Smedley Butler as the American president in the early 1930s, and he understood what they were up too, he ended his relationship with the crypto-fascist government, which at that time was in the process of being forced on the American public. Thus, this economic and financial theory of Keynes was part of the rise of corporatist fascism. His ideas and those of others were never able to capture the imagination and following of the American people, thus today it is being forced upon them. The theory is we know better what is good for the people than they do. This allows the elitists to control political power by controlling both major parties from behind the scenes. People do not want this kind of government and do not willingly embrace it. As a result it has to be forced upon them by using economics, politics or the distortion of the law. Thus, we see the pragmatic rise of Keynesianism as an integral part of the effort to bring about total dictatorial power on a scale only previously attempted during the reign of the Roman Empire. This fellow Americans is what is being done to you, your country and your culture. (emphasis mine)

Each passing day more and more observers come to the conclusion that there has not been and will not be a recovery in the sense that they believed there would. The proof is the actions the Fed has taken to use additional monetary easing and to continue zero interest rates. We forecasted such events some six weeks before they occurred and believe the Fed will have to inject some $5 trillion over the next two years just to keep the economy going sideways.

As Treasury Secretary Geithner assures us of recovery, Mr. Bernanke assures us that enough stimulus will be added to achieve that recovery. As this transpires the economy falters. We can promise you this all has little to do with the economy, which is an after thought and everything to do with keeping the profits of financial institutions in tact and growing. The stimulus is upon us.

Not only is the Fed going to purchase Treasury and Agency paper with the interest they have received from the CDOs and MBS they purchased from mostly financial institutions, but also they intend to sell that paper back to the sellers. The Fed refuses to tell us what they paid for this toxic garbage, so we will assume it was 70% of the face value. They will now sell these bonds back to the lenders for 25% of face value. The American taxpayer gets to pay the difference. The lenders make out like bandits and the Fed will have cleared its books of what was $1.8 trillion of assets at $1.35 trillion. Ostensibly, the Fed will use those funds to purchase Treasuries and Agencies.

In addition the banks are sitting on $1 trillion plus, which they borrowed from the Fed at zero interest rates and then lent back to the Fed at 2-1/2%. We believe that interest rate will either be reduced or eliminated. The banks can either return the funds or lend them. Under the fractional banking system that can be at any multiple. Lending nine times assets is considered normal. The banks presently are committed for an average of 40 times. Even at five times they can lend $5 trillion if they can find borrowers. A combination of purchases by the Fed and lending by the banks will furnish the required liquidity needed to keep the economy stable, albeit temporary, for the next two years. We believe this is the Fed’s plan, which we exposed a number of weeks ago, while most experts were sleeping. The insiders know and we watched what they were doing and in their greed they exposed the entire plan.

The flip side of the plan is that monetization causes inflation and in this case perhaps hyperinflation. That infusion of capital could keep the stock market at an unreasonably high level, as it is assisted as well by zero interest rates. The great danger is higher gold and silver prices, an indication of higher inflation and loss of purchasing power. That is why, over the past 15 years, the Treasury has manipulated and suppressed gold and silver prices, via the “President’s Working Group on Financial Markets.” The Treasury and the Fed do not want gold and silver prices higher because they reflect the destruction of buying power for US dollar users. This is the game being played and the inside players know they will have to face the music in two years. They will either have to repeat the performance or deflationary depression will take over and swallow the system. It should also be noted that the Treasury via Fannie Mae, Freddie Mac, Ginnie Mae and the FHA has been guaranteeing trillions of dollars in subprime loans, knowing full well that next year those loans have to be rewritten and rolled – as much as 50% could fail. That and the poor economy could bring 20 to 30 percent lower real estate prices over the next several years further depleting the wealth of Americans and causing more massive losses for taxpayers. Many of those packages of loans were also again sold to investors who will be taking losses. If you mix in the losses in commercial real estate you have quite a rancid kettle of fish. This does not present a very encouraging future.

Some view the Fed’s intention to reinvest cash receipts from the CDO-MBS portfolio into Treasuries as no big deal. What the Fed does not tell you is what else they are doing. That is what counts and that is the difference. Can you recall your TARP commitment via AIG that was used to bail out banks, brokerage houses and foreign financial entities? That was a state secret until the Fed was forced to reveal what they had done. Some $112.5 billion went to foreign banks. Thus, the Fed cannot be counted on for any element of truthfulness. (emphasis mine)

There is no exit strategy and that now is very obvious, at least from a conventional viewpoint. If economists, analysts and strategists understood what this is all about their viewpoints would change dramatically. This crisis just didn’t happen – it was created. Eventually the people behind the curtain will pull the plug and those inside the matrix won’t know what hit them. (emphasis mine)

The $5 trillion the Fed intends to inject into the system over the next two years, or whatever is necessary, is the signal that tells you the plug is not ready to be pulled, at least not for now. They have to get their next war going first.

The Fed well knows that more and more liquidity is no solution. That has been proven over and over again in history. It has again been proven over the past three years.

We just witnessed another phony market rally based on inside information that the insiders used to best advantage. The elitists ran up the dollar again in another futile attempt to pad the dollar’s value before people realized that excess liquidity could only weaken the dollar. The gold and silver suppression team did its best to smother gold and silver, but was unsuccessful again. We have never seen so many economists, analysts and newsletter writers be so wrong. Being wrong must be a communicable disease.

Treasury paper is at record lows as investors scramble for perceived safety. The manipulation of gold, silver and commodities just gives opportunists the opportunity to buy cheaper. The dollar rally will soon end and gold and silver will move higher – even Goldman thinks so. The hearts of our monetary and fiscal systems are sick and only a purge will make them well again. The longer the inevitable is postponed the worse it is going to be.

Our purchased Congress has again put the fox in charge of the henhouse in the Wall Street Reform and Consumer Protection Act, which will be privately funded by the foxes and not by Congress. The legislation anoints the Federal Reserve as a financial potentate, a financial and monetary dictator that will effectively run America. The vagueness of the legislation is such that its powers are virtually unlimited. This is a far cry from Ron Paul’s legislation to audit and investigate the fed. It proves how powerful banking and Wall Street really is. Via campaign contributions and other artifices, they control most of our elected representatives. They even have a new agency to protect consumers, which is certainly ludicrous. While supposedly protecting consumers the Fed is creating trillions of dollars out of thin air that these same consumers are responsible for. Americans are as well responsible for the losses incurred by the FDIC. Before this depression is over Americans will be enslaved to debt, debt so overwhelming that it can never be paid, and will enslave Americans permanently. (emphasis mine. again)

The step that the Fed is engaged in now is a major continuation of quantitative easy, which will be followed by propaganda to make banks lend trillions of dollars and for American consumers and business to borrow to keep the economy running and to pile up more debt. We are skeptical that individuals and business will take the bait. Government programs are now being discussed to refinance toxic waste, known as CDOs and MBS. We explained earlier that the Fed wants to repackage MBS debt obtained from the same banks at $0.70 on the dollar and resell it to them for $0.30 on the dollar. The public pays the difference and the Fed frees up money on its balance sheets. This way on a fractional basis they can lend additional funds and along with bank lending create enough liquidity to keep the financial system from collapsing. The government, or should we say the taxpayer, is guarantying all this debt. All that is left is to get people to stop saving and to start piling up debt again. This is the thinking behind stimulus as opposed to austerity and higher taxation, as currently being practiced by Europe and England. The powers behind government in America are going for broke. If what they are doing doesn’t work, the US financial system goes down and the world financial system with it.

Thus far what the government has done hasn’t worked. If you take the probable growth of 1.3% to 2.4% in the second quarter and you subtract 1.7% from the stimulus, you come out with virtually no real growth. In fact, for the past year and a half there was little or no growth; perhaps minus growth. If the Fed doesn’t get stimulus into the system again quickly it will be too late. The downward spiral has already begun – shipments, new orders, wages and capacity utilization are already falling off a cliff. This problem is also affecting former very strong areas of the country.

Those who believe a recovery is on the way had best examine their premises. The Fed, Wall Street and banking intend to buy two more years. If they are successful inflation will elevate substantially and the only place to find safety will be in gold and silver related assets. A word to the wise should be sufficient.

Read the rest of the article here:http://www.gcnlive.com/wp/2010/08/20/banks-will-still-profit-in-this-faltering-economic-recovery/

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And now that fun video I promised you.

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