Bob Chapman: Blatant Corruption Will Cause Revolution, Destroy the Middle Class
As we have noted before the rage of 1789 in France cost the heads of 300,000
tormentors out of 30 million Frenchmen. The question that presents itself is will
something like this occur again in our times. We suppose it could, but we won’t know until it begins to happen. The most
likely location for such an event is in Greece, which has already experienced major
demonstrations and rioting.
There is no question that in many parts of the world people are disgruntled and
in many cases enraged with their governments and particularly with the financial
sector. Not only has the populace been defrauded, but also the fraud and deceit
continue unabated. In Europe almost every country is or will be subjected to austerity
programs. In America we have rage pointed at Wall Street, banking, corporate
America and government. The Tea Party movement addresses that in a number of
ways from a great cross section of Americans. They see the blatant corruption tearing
their country, republic and democracy apart. They do not want capitalism torn apart by
the Council on Foreign Relations, the Trilateral Commission, the Bilderbergers and the
Illuminati. They do not want fascism, socialism and Communism shoved down their
throats. They do not want any new world order or a one-world government. In all
countries there is a faction of more than 10% of the population that are willing to
sacrifice their lives to make sure that doesn’t happen. They have seen the 1980s S&L
crisis where billions were stolen and few went to jail. The same was true with the
failures of the 1990s and into the new century. We saw LTCM and no one went to jail
and then Tyco, Enron, Qwest and WorldCom. Then there was Michael Milken and
Drexel, Burnham Lambert. He was charged with almost 100 crimes, pled to six, paid a
$2 billion fine, spent two years in jail and got to keep $1 billion for his crimes. Today he
basks in luxury as a reward. Then came the biggest scam of all and that was the
Madoff caper.
Financial crime by sociopaths is still flourishing. That is because our system of
jurisprudence doesn’t work. We have one set of rules for connected Illuminist, another
for common white-collar criminals and another set of rules for us. Is it any wonder that
the public is outraged at such crime? George Soros, Illuminist, is held up as a shinning
example of financial acumen. He was convicted of stock fraud in Paris, appealed and
lost and was convicted in Hungry as well. Why is that never mentioned when he
appears in interviews and on television? It is because his elitist group controls these
venues. The same is true of Warren Buffett whose firm, Berkshire Hathaway, was
convicted of a $300 million accounting fraud and paid a $100 million fine. As you can
see no one hardly ever goes to jail and those who do are not connected Illuminists do
end up in jail. There is essentially never any payback. All the CFTC and SEC want are
the fines to cover their expenses and to expand their staffs, and they only act when
forced too. There has been very little payback and the public rightly wants revenge.
Thus far they have gotten little or nothing from their well compensated representatives
and senators, who generally are crooks and malfeasants.
All this doesn’t go down very well with real unemployment of 22-3/8%, soon to
be 23-3/4%. As the public stands in these unemployment lines they watch the Fed
feed money to financial institutions, which they created out of thin air, and the debt of
which these same unemployed are responsible for. The banks, brokerage houses and
insurance companies ae illegally kept from bankruptcy and with these same funds
reap unbelievable profits. At the same time incompetent executives receive
outrageous compensation. The public is deeply disturbed and well they should be. Is it
any wonder that incumbents have a 27% approval-rating going into next November’s
election? That is the lowest number since 1994. It is interesting that those in both
major parties share the disappointment. On the other hand unemployment benefits
have been extended to two years. We suspect with this gang in the White House,
House and Senate, that those benefits could go on forever as our sovereign debt
collapses, such as Greece’s did. Voters see no morality, representation and integrity in
both houses. Payoffs and fraud flourish and no one seems to care whether they get
caught or not. Grab as much as you can as fast as you can and sell your soul if
necessary. Of course, the SEC and CFTC are nowhere to be found as they protect the
crooks running Wall Street, in banking and in insurance. There is little incompetence -
they are all in on it. Remember the connected elite never go to jail. They are fined and
the shareholders pay the bill.
The financial industry is loaded with fraud and always has been. Can you
imagine a banker making loans to the completely unqualified and using 70 to 1
leverage, when 9 times deposits is acceptable? Can you image rating agencies rating
paper as AAA when in fact it is BBB? Then there are the 35% overvaluations of assets
that lead to bank failures and no one goes to jail. This is serious crime and these
crooks just walk away Scot-free. What a system. The Bernie Madoff’s flourish and
have no remorse having stolen from little old ladies. He complains they threw money at
me, what was I to do? Refuse it you scumbag.
How can any professional not express dismay when banks such as Goldman
Sachs, and JPMorgan Chase never have trading losses. We did that for 25 years and
they and we know that is impossible. Worse yet, 80% of their clients lost money.
Those trading profits made up 93% of profits at Morgan Stanley as well. As a
professional we know the only way that can be accomplished is by screwing your
clients.
We can count in as well naked shorting, front running (flash trading), theft,
money laundering, fraud and rules that let players neither admit nor deny and pay a
fine.
This is what your financial system has come too. You are controlled by a group
of criminals.
As a result of this outright criminality we are being led into one of two solutions
– either a plunge into deflationary depression or a systemic crisis that is approaching
three years in duration. The direction taken by the Federal Reserve, the banksters and
Wall Street is yet to be determined. Our guess is the inflationary onslaught has only
begun. We are well aware that M3, money and credit, over the past 15 months, has
been reduced from growth of 18% to a negative of 5.9%. That and other things were
done to head off inflation, which is currently 2% officially, but unofficially is 8%.
We announced that an inflationary depression had begun in February of 2009,
some 16 months ago. The US represents about half of world GDP so what happens in
America will affect the entire world. In three months America will have experienced
three years of recession/depression, the longest and deepest financial and economic
contraction since the 1930s. A year ago the economy was headed downward and had
it not been for $800 billion in stimulus and an additional $1.5 trillion injection by the
Fed, we would currently be far deeper into depression. That means that we are seeing
the end of the effect of stimulus and if it is not repeated the economy will falter and slip
into deflationary depression. Each time the Fed and in part Congress allows this to
happen it takes a much greater amount of money, credit and fiscal stimulus to keep
the economy in positive territory and therein lies the seeds of hyperinflation.
In the 1973-75 recession we saw inflation. That was followed by further
stimulus provided again by the Fed, which culminated in the economic blow-off of
1981, which in turn was followed by high interest rates and a deflationary recession.
These two events tell you recessions/depressions can be either inflationary or
deflationary. Compounding the problem is the accumulation of sovereign government
debt, which has been and will continue to grow exponentially. That certainly is
inflationary, but worse yet is it cannot be paid back no matter how high taxes are
raised.
We need not remind you of the real estate collapse that is still in progress and
the incumbent bonds many of which are close to worthlessness. These are
deflationary events that over the past three years they have been covered up, massive
injections of money and credit. Deflation was offset, or more than offset by inflation. As
a result many corporations are carrying two sets of books. One set contains the toxic
waste the other set the better assets. This has caused terrible problems especially in
the banking system. This is the prime reason so many banks have problems. Eightyone
have fallen this year and that figure will more than double before the year ends.
This is why the Fed wants to take over the FDIC. Once the FDIC is out of money, if
they are regulated by the Fed, all the Fed has to do is create more money out of thin
air to guarantee deposits. At the same time the Fed will attempt to monopolize the
banking system. They will allow weak banks to fail and others to be absorbed until
there are only 5, 10 or 15 banks in the country.
The reason we do not as yet have hyperinflation is that banks that have
borrowed $2 trillion are not lending it into the system; they are depositing those funds
with the Fed. If banks start to increase lending then inflation will jump because the
funds will no longer be sterile, they’ll have been monetized, or if you may, inflationized.
Now you can understand part of the reason banks have reduced lending by more than
20%.
In the absence of increased bank lending we also have an M3, the supply of
money and credit, which is now negative. In fact, at a record low. That means a
deepening recession/depression and a lower stock market. A correction in all
probability similar to 1973-75. Whether we will see higher oil prices, as we did then,
remains to be seen. A Middle East war could provide that element. In fact, recently we
said there would be negative GDP growth in the 3rd and 4th quarters due to the lack of
stimulus of one kind or another. States are in a terrible fix and unless the federal
government comes forth with aid many states will become insolvent. This would add to
the downward spiral. The government will have to come to the aid of the states
otherwise the system will collapse. That as well means massive layoffs to add to the
already growing unemployment situation. The government will become the lender of
last resort and a bankrupt. A latter day version of Atlas Shrugged. All the while the Fed
is creating money out of thin air funding these bankrupts, as inflation climbs. Keep in
mind that with the assistance of the Fed the nation would already be insolvent, save
for its status of the dollar as a reserve currency. The dollar is in the process of being
dismantled, so that our elitists can usher in a new world currency eventually. An
example is Greece has a very real problem, that probably only default can solve.
Greece has 1% of the problem the US has and that will be reflected in the falling value
of the dollar not only versus other currencies, but most noticeably versus gold. In fact,
for the past four years all currencies have fallen in value versus gold. In time all
currencies will be sold in part to purchase gold. Gold is again becoming the currency
standard for the world whether the elitists like it or not. The professionals, the markets,
and the central bankers know this and cannot control it, as hard as they try. All the
taps can be turned on at a moments notice, so hold back on your decisions on which
way the central banks are going to go.
Unemployment is worsening and that means income cannot grow and that
means the economy cannot grow.
The bottom line is in our criminal world your only protection is in gold and silver
bullion, coins and shares. If you bought these in June of 2000 you have kept your
buying power as that of the US dollar declined. The suppression has been constant,
but stay the course, the greatest gains have yet to be made. By owning these assets
you are preserving your wealth and then some. Don’t be deterred by these writers who
have been perpetually wrong. Go long and stay long. It is your only hope of retaining
what you have.
Looking at the residential and commercial real estate markets and many other
factors tells us if the Fed doesn’t use massive monetary stimulus quickly the economy
will fall into a terrible depression. The mortgage application index fell 12.2% adjusted
and 21.1% unadjusted. The purchase index fell an adjust 5.7% and plunged 16.3%
unadjusted. That is 30.4% YOY. Purchase applications have fallen 35% in just four
weeks and rates are lower. Prices are again headed down and the 3rd and 4th
quarters are going to be terrible. While this transpires government encourages the
banks to hide and delay foreclosures. Some have allowed tenants to stay in the homes
rent-free for up to three years. this has created a giant shadow inventory. Speculators
cannot hold the market up forever. They are always potential sellers. Put together we
see another 20% decline in prices and perhaps more. Most homeowners have 5%
equity and 25% or more have no equity. By 2013, 75% could be without equity. This
negative equity continues to make homeowners walk away from their homes and as
well create a major social problem, plus destroy the solvency of the middle class.
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