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Monday, April 5, 2010

The Smoke and Mirrors Economy by Bob Chapman

by Bob Chapman
The International ForecasterBob Chapman The International Forecaster
April 5, 2010

We have an economy run on smoke and mirrors, based on the manipulation of markets. That was accomplished via the executive order signed by President Ronald Reagan in 1988 in the aftermath of the stock market collapse of October 19, 1987, known as the “President’s Working Group on Financial markets.” This order intended to be implemented during emergencies has been used to manipulate markets worldwide 24/7.
We experienced an example of this misuse of power when the Dow Jones Industrial Average rose from 6,500 to 10,900 over this past year. This rise was aided by TARP and a host of other programs that injected trillions of dollars into the economy, which, of course, the American citizen is responsible for. The result is we do not have free investment markets. A secret group led by the Federal Reserve and the US Treasury Department runs them. The SEC and the CFTC play their parts as government agencies to make sure the public doesn’t know what is going on. Another recent example is the CFTC testimony of Andrew Maguire, who informed the CFTC the date on which the market in silver was going to be manipulated by JPMorgan Chase. The manipulation occurred as outlined by Maguire and the CFTC did nothing to stop it. Thus, we have heavily manipulated markets that are part of control planning by our government in order to shape economic policy. If you happen to be on the right side of the trade it is fine. That is in this case if you are long the market. The other side of the trade is you lose as your government suppressed the gold and silver markets. You lose in a rigged market. This is the new American way. Seeing 72% of NYSE trades are black box created Wall Street wins and you lose. Better yet you just were allowed to bailout Wall Street and banking. Such a deal brought to you by the masters of the universe members of the Illuminist Skull & Bones.

Elitists believe that everything you have belongs to them because they created it are managing your financial life. A good example of that was on March 18th our President passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act HR 2487, which is now not only known as HIRE, but the Capital Controls Act as well. It requires foreign banks to withhold 30% of all outgoing capital flows to the Treasury and to disclose the full details of non-exempt account holders to the IRS. That is because the elitists allowed you to make that money and so they demand their 30% cut. If this demand is illegal in a foreign destination then the US government demands that the account be closed. The bottom line is if a foreign financial institution operates in the US or has a subsidiary in the US, they have to comply. That means the law is easy to get around, but the very fact that government has implemented Capital Controls is ominous.

Who do they think they are? Is there no privacy left? We also understand that those who have offices in the US must reveal all information in a foreign account in a foreign country and if that information is not forthcoming the US government demands the account be closed. Many banks will leave the US and that is understandable. Very few Americans have foreign accounts, thus this is just more harassment, and an attempt to further control the lives of Americans. As the world turns its something new monthly from government. We are averaging ten emails a day because of this and medical legislation from people who are very serious about leaving the country.

As you can see manipulation of the public masses and the market are part of official public policy, as well as of that of Wall Street. It has been for many years. We started to write on the subject in 1965. Today it is becoming public knowledge. This manipulation has become the nexus or mainstay of economic and political policy. The resultant financial policy has produced zero interest rates and more money and credit than at any time in modern history. They, the planners, expect that soon unemployment will reverse, but as yet that has not occurred, in spite of trillions of dollars being poured into G-20 countries, plus tens of trillions more in guarantees. In the US $1.5 to $2 trillion was put into financial companies, while the public was thrown a bone. Now that interest rates are rising and will continue to do so for some time to come, our master planners are getting nervous. The Fed is withdrawing funds from the system and stimulation has ended. What our geniuses are finding out are that once having achieved this withdrawal the US and world economy will start stepping back from this so-called recovery. Massive monetization has to continue to buy sovereign debt. If it is not available there are a minimum of 19 sovereign nations that will go bankrupt. America and the world haven’t gone under due to massive quantitative easing. The Fed is reducing money and credit, which is a major mistake. They are going to find there is going to be no exit.

As a result of very low interest rates investors have been attracted by high yielding junk bonds, which is a fatal mistake. Sooner or later 12 to 15 percent will go under as yields rise and bond prices fall in the future.

The ability of companies to increase earnings during a depression is via layoffs and forced productivity increases, as well as quantitative easing and stimulus. When you have 22-1/8% unemployment you have far less consumers to sell too. As this situation persists it can only be a matter of time before earnings fall.

That means that at current levels the stock market is very overpriced. The crowding out caused by sovereign debt sales is exerting tremendous pressure on bond yields and as we have said we expect the 10-year Treasury note to soon be over 4% and up to 5% over the next nine months. These events will bring the housing market to an abrupt halt. We see no way that can be halted.

What will it be, foreign governments dumping US Treasuries and other sovereign debt or a massive oversupply of such debt? Probably a combination of both. It is hard to declare a recovery when 92% of small businessmen say they as yet see no recovery and 60% say if it comes it’s 14 to 18 months away. These kinds of poll results mean less not more spending and the selling of shares and bonds. That means a higher commodity market and gold and silver prices as a place of refuge. Bond yields are telling you something is not right. The bond market speaks with a very loud voice. As we said before yields are rising, which can be viewed in an overall sense as normal. The real problem, which is getting much worse daily, is the overhang of sovereign debt and sales by formerly large Treasury buyers. Now that China has been accused as a currency manipulator and for keeping US goods out of China, I think we can expect more sales rather than buys in the future. Debt is the Achilles heel of our financial system. The yuan is strengthening. That means US imports from China will rise in price and the US will experience higher inflation. All these factors will bring a lower stock market.

Everyone on Wall Street is well aware of what the plunge protection team has been up to for a long time, No one says anything because as long as the market rises they do not care. It is a conspiracy of silence. They know the market is selling where it is because of manipulation, but they could care less. They believe the Fed will keep the 10-year note under 4%. We disagree – we will see. Irrespective to the damage to the economy they want a goldilocks economy. There has even been talk of negative interest rates. Government will pay you to borrow money to accelerate the economy and, of course, at the same time create more inflation. We wonder what Wall Street will do when more Treasury debt hits the market? It is $50 billion a week now. We cannot envision monetary tightening without a collapse. We see tariffs versus China that will grow to include the world and that has to mean Chinese sales of Treasuries. Confrontation is on the way, which means everyone is going to suffer.
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Mr. Chapman also known as The International Forecaster is a 74 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.
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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 June of 1991, at the request of business associates, and due to retirement boredom, he began writing the International Forecaster.
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