“Let’s face it; many of the world’s ‘developed’ nations are insolvent … Either (they) will default or they will try and inflate their currencies into oblivion. Politicians can lie all they want, but the truth is that the debt obligations of these European nations are simply too large relative to the size of their economies.”
“In Greece, government debt now represents almost 160% of GDP and the average yield on Greek debt is around 15%. Thus, if Greece’s debt is rolled over without restructuring, its interest costs alone will amount to approximately 24% of GDP. In other words, if debt pardoning does not occur, nearly a quarter of Greece’s economic output will be gobbled up by interest repayments!”
Puru Saxena, Do The Math, 8/21/11
Yes, it must be emphasized that the debt obligations of several other major nations are similarly “too large”. Also, ominously, the financial sector has manifested a serious downtrend in recent months (e.g. see chart of XLF) -- a precursor to the crash of many market sectors, as it was in 2007-2008.
“…the Fed has to again purchase about $900 billion more Treasuries this new upcoming fiscal year. There is no way to avoid that and if they have to buy Agencies and more toxic bonds the figures will be higher.
No matter how you look at it quantitative easing is a bailout of the financial sector. That even applies to the Fed’s purchase of Treasury, Agency bonds and other toxic waste, because it relieves the financial sector of the responsibility of purchasing these bonds. Those funds are then freed up for speculation in markets. This approach to financial crisis assures the survival and profit of the vested interests…
Their only real mission is to keep the financial sectors in NYC, London and Europe solvent and operating. There are no other considerations, except printing trillions of dollars to keep the stock market up… As a result of this myopic approach wages have hardly grown, unemployment has continued to rise and consumer purchasing power has fallen about 10% year-oover-year… None in Wall Street, banking or government has a care about the American worker, who is earning much less than 11 years ago, or retirees who have to find a way to exist on 1% or 2% yields on their meager savings.
These are the same people who rig every statistic released by government and even some issued privately.”
Bob Chapman, The International Forecaster, 9/10/11
It should be clear to all realistic astute, and non-mainstream media-bamboozled observers by now that, like it or not, a new era for investing, economics and politics has begun.
It is absolutely essential to understand certain key characteristics of this new era.
Failure to do so can lead to investing and economic ruin.
Doing so is a necessary condition for investing, economic and, indeed, political success.
First, it is essential to understand the reality of the inflation – deflation conundrum.
The question is: are we now in a deflationary or inflationary period and where do we go from here?
True, there are strong deflationary forces in play. Real estate in the U.S. and elsewhere is still deflating, wages are flat or down and unemployment is up. There has been essentially no significant new net job creation in the U.S. or Europe for years.
BUT, notwithstanding these deflationary forces, the inflationary forces now predominate. In fact, the trillions of “printed/digitized” fiat dollars and other currencies which the Fed and its allied central banks are creating has, and is, creat(ing) massive price rises in the essentials, especially food and energy.
Taking all the deflating and inflating factors together leaves us with, for example, 11.4% real CPI in the U.S. and with similar figures in developed and developing economies – all threshold hyperinflationary.
Shadowstats.com calculates key statistics the way they were calculated in the 1980s and 1990s before official data manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported September 15, 2011
3.8% / 11.4% (annualized August, 2011 Rate)
U.S. Unemployment reported September 2, 2011
9.1% / 22.8%
U.S. GDP Annual Growth/Decline reported August 26, 2011
1.55% / -2.83%
U.S. M3 reported September 9, 2011 (Month of August, Y.O.Y.)
No Official Report / 2.30%
And the massive amount of printed/digitized dollars that the ECB U.S. Fed and three other banks promised (on September 15, 2011) to loan European bank will surely be an additional hyperinflationary force.
This leads us immediately to one major threatened sector – vulnerability of pensions.
As Jeff Nielson points out, since nearly 1/4 of many nations’ GDP is consumed in paying interest on debt to mega-bankers and since many pensions funds’ assets are typically deployed in assets which are, and will be, most hurt by such asset allocations, these funds assets are increasingly at risk from both prospective hyperinflation and outright default.
“Western pension crisis”… has two primary drivers… nearly ¼ of the GDP of these various economies consumed in paying interest… these economies can never generate the same average level of return we experienced when our economies were in relative health… the propensity for pension fund managers to buy the worst investments in the marketplace.
...these pension fund administrators have allowed their decisions to be “heavily influenced” by the Western financial syndicate – i.e. multinational bankers…
“pension reform”: (should) require pension fund administrators to invest in the same financial products they are purchasing for pension beneficiaries – at least in their own pension accounts.”
“Salvation For Western Pension Funds”
Jeff Nielson, lemetropolecafe.com, 9/10/11
This leads us to another Achilles heel of developed western nations, especially the USA.
The U.S. has (and is) engaged in shipping jobs overseas through a variety of so-called “Free Trade” agreements.
The argument by free traders is that Americans will benefit from cheaper imported goods.
But the unemployed and underemployed Americans cannot buy cheaper goods at any price, and they (all 50 million of them when members of their households are included) impose additional huge social safety net costs (food stamps, welfare, free health care, education, unemployment insurance) on those who are still working, far outweighing the ostensible benefits of “Free Trade.”
Instead, a reasonable multilateral tariff system (“Fair Trade”) could solve the problem, but none appears to be in sight.
“Republicans stupidly cling to trade agreements as a means to boost the US economy. This is a staple crony capitalism policy. How did GATT work out? What about MFN for China? Anyone want to defend how NAFTA helped the US economy?
All trade agreements of recent vintage have induced US large corporations to boost foreign production and cut US jobs. US corporations main rationalization for the trade pacts has been to proclaim that the trade pacts will bring lower priced goods to the US. This only benefits those that have jobs…Fair trade pacts, quid pro quo, should be the standard.”
Bob Chapman, The International Forecaster, 9/10/11
And we need not comment further (than we have in previous articles) on the inability and unwillingness of economic policy leaders, e.g. at the ECB, Fed, U.S. Treasury, etc. to provide effective and sustainable solutions for economic, financial, and employment problems. A prime example is the sovereign debt crises. It appears increasingly likely that certain nations will have to choose between national failure and mega-bank failure.
Black Swan author Nassim Talef sums up the solution to this problem rather nicely:
“People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.”
But a changing of the drivers (the Fed-led mega-bank Cartel and subservient politicians) is not likely any time soon.
Finally an investor needs to address a prospective crisis in corporate earnings and thus a prospective serious market swoon in the equities markets.
David Rosenberg states it well,
“Between equities and commodities, a pretty clear picture of softening global economic growth has re-emerged. Ignore these signposts at your peril, as they are not being reflected in the analyst earnings forecasts that investment banks publish and portfolio mangers listen to.”
And it is not merely the prospective earning’s crisis which will cause a market swoon, but also the credit debt, and inflation crises.
For investors the solutions are three-fold:
- Buy essential tangible assets on the dips. And we specifically recommend gold, silver and food. But the timing of gold and silver purchases is especially important because these precious metals are subject to ongoing price suppression attacks by a Fed-led Cartel (see below*) of central bankers and their allies. Tracking these interventionals has facilitated Deepcaster’s making four profitable buy and sell recommendations in the last 60 days (see note 2 below).
- Go local when possible. A quick look at the XLF shows the present and prospective vulnerability of the banking sector. Keep assets outside of the global banking sector when at all possible.
- Make provisions for your personal safety. As crises deepen social chaos is likely. Just a decade ago the Argentinean financial crises resulted in power outages, termination of police and other services, gas stations closures, foodless grocery stores, and bank and retirement check failures. It can happen where you live too.
Related:
- Maximizing Profits from The Real Golden (& Silver) Bull (9/2/11)
- Last Tango Opportunities & Traps - Overview (8/5/11)
- Profitably Playing Manipulation (7/21/11)
- Superb Fortress Assets Opportunities (6/30/11)
Finally, bear in mind that, finally, some relief is coming to precious metals partisans who have suffered from Cartel* precious metal price suppression attacks.
By the end of the year, the Pan Asian Gold Exchange should be in operation in China.
This should aid considerably in achieving real market price discovery for gold and silver, as opposed to the managed price discovery mechanism characteristic of the Cartel/London-Bullion-Markets Assn. dominated era, an era now drawing to a close.
*Note 1: We encourage those who doubt the scope and power of overt and covertinterventions by a Fed-led Cartel of key central bankers and favored financial institutions to read Deepcaster’s December, 2009, special alert containing a summary overview of intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to the interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
Note 2: The staggering magnitude of Fed (and other central banks) ongoing money printing and credit (i.e. debt) creation can lead to only one conclusion for most investors around the world, and one question.
Conclusion: The purchasing power of my fiat currency will continue to decline (e.g. real U.S. CPI now at 11.4% per Shadowstats.com), and
Question: How do I protect myself and profit?
Deepcaster addresses the questions of profit and protection in light of fiat currency purchasing power destruction in his recent article – “Essentials for Wealth Acquisition Acceleration” and provides guidelines.
To read this article -- “Essentials for Wealth Acquisition Acceleration”, go to www.deepcaster.com and click on the ‘Articles by Deepcaster’ Cache.
Past profitable performance is no assurance of future profitable performance.
Note 3: We cannot fail to note an honor recently bestowed upon us by the dean of the newsletter writers, and investment legend, Harry Schultz. Uncle Harry refers to our forecasts for the week ending August 26, 2011:
“Congrats on another brilliant advisory.
U have courage & insight.”
Cheers,
Uncle Harry
We very much appreciate Uncle Harry’s wisdom and kudos.
