Bob Chapman - Inflation, Housing Collapse Amid Record Bankruptcies

We are in a war against truth and humanity. Fortunately our message of truth and who is behind the curtain pulling the strings is finally getting to people worldwide. In free societies it is not the place of corporations or governments to run economies. That only occurs in socialist, fascist, communist or corporatist societies. The premise of government control in cooperation with corporations is what we witnessed in totalitarian societies in Europe in the 1930s and unfortunately it is happening again.

Today government attempts to run the sovereign states, and the national economy right down to stimulation and control of the economic cycles. That is done together with the privately owned Federal Reserve, which under new legislation has become a financial dictatorial power that with the Treasury runs the US economy. In this process there are no ethics and morality, only the exercise of power and control. We have seen this evolution since the false flag event of 9/11. This is done through fiscal deficits, excessive taxation and monetization. These artifices are used to control not only the economy and markets, but the people as well. Remember government and the Fed produce nothing – they only manipulate the process and essentially expropriate the wealth of the wealth producers. All kinds of excuses are made for government, banking and Wall Street but none of them create wealth. They control our lives by force, usually legally by paying off our elected representatives, who unfortunately are ever open to use their positions to criminally serve other masters. Is it any wonder that our future appears to be so discouraging, as the rich get richer and the people get poverty. That can be borne out by 21-1/2% unemployment and the bailout of the very parties that created our problems in the first place. 

The recent revelation that the Fed would again move toward monetary easing has been preceded by swaps and loans to foreign central banks unbeknownst to most. At the same time banks’ accumulation of Treasury securities has gone parabolic, since the Fed funds rate is near zero. This is a method of feeding liquidity into the system and at the same time sanitizing the funds. If the bonds sit in the bank vaults they are not monetized, but they are monetized by the Treasury. Those Treasury funds are fed into the economy to augment the fiscal deficit. It should also be noted that the Treasury has raised double the amount it needs. What use that money will be put to remains to be seen. That banks borrow at no cost and buy long dated Treasuries at an average of about 3%. These are essentially risk free transactions and moves banks further toward solvency. In the meantime banks are reporting higher income by increasing the value of their toxic waste arbitrarily. The trick increases asset values and earnings, but not cash flow and that is why they need to borrow from the Fed to create cash flow to buy Treasuries and Agencies. If you factor in just 9 to 1 leverage you can see the tremendous cash flow being injected into the system. Thus, you have part of the quantitative easing and for all intents and purposes very few realize what is going on. You ask where are the inflationary aspects? They in part are offset by the losses incurred by assets on an ongoing basis. That is aided by hedonics being employed to keep the CPI, inflation, at ridiculously low levels, when in fact real inflation is 7% to 8%. Intelligent people are bamboozled by phony government statistics, propaganda and misdirection by the magicians who control our country from behind the scenes. As we mentioned earlier this is but one way of feeding liquidity into the system, which is hidden in plain sight.

All this funny money being fed into the system has to have repercussions and it does. The flip side is that intelligent investors see the error of the ways of the Fed and other central banks, and they are forced to purchase gold with their Federal Reserve notes, which lose value continually. The Fed, the Treasury, banking and Wall Street do not like that, so they use the law and executive orders to manipulate the prices of gold and silver and everything else that is traded worldwide in what are supposed to be free markets. Unfortunately there have not been free markets for a very long time. We don’t know what “The Working Group on Financial Markets,” also known as the “Plunge Protection Team” is doing because they won’t tell us. It is a state secret. Thus, we have to back into what our government is doing and why they are doing it. As you know government doesn’t believe we have a need to know. They know what is best for us. Of course, we do not want to omit the important role played by the Federal Reserve, which is a privately owned entity controlled by bankers and operators from Wall Street and the City of London. That is why you see a revolving door between the bankers and brokers on Wall Street and the US Treasury and the Federal Reserve. They own it and they run it only for their benefit – no one else’s. That is why Wall Street, banking, insurance and selected transnational conglomerates were bailed out by the American taxpayer and why those taxpayers were thrown a bone. Thus, we have had 98 years of banker manipulation and financial tyranny. As each political group came and went in Washington the same bureaucrats kept turning up over and over again. A sub-class of drones that carry out the wishes of Wall Street and banking. All have one thing in common – they have a strong predilection for world government and believe Americans should have such a government. So much so that they and many others ignore our Constitution, because they believe it to be obsolete. That is because they know better than we do what is good for us.

These believers in this new world order are deliberately attempting to bring down the existing financial and economic systems in order to force Americans, Europeans and others to accept this new world order. Beset with such a process it is natural for intelligent people to protect their assets and what wealth they do have. Over the last six centuries people have sought gold to accomplish this, because it doesn’t owe anyone anything and has been recognized as the only real money over those many years. This is why our government and Federal Reserve do anything possible to keep people from accumulating gold because it is the very antithesis of paper fiat money.

As we approach November congressional elections and the end of 2010 we see no effort to reign in deficit spending, trade deficits nor the quantitative easing by the Fed. Most people do not realize it but both the US and the Europeans are in desperate trouble. They are in the midst of a recovery that is non-existent. In addition we see bogus statistics of all kinds being emitted by the administration, particularly for inflation and employment. The massive spending by the Fed cannot bring back American jobs lost to free trade, globalization, offshoring and outsourcing; that can only be returned by implementing tariffs on goods and services. 

In order to improve the deficit some politicians want to cut Social Security and Medicare, and raise taxes to improve socialism and to fund more foreign wars. These people, experts, have no solutions. What they should be doing is cutting government spending by 30%, government salaries by 50% and end foreign wars and occupations.

As a result of America’s current position the dollar is again falling against major currencies in the USDX and against gold. It is obvious America cannot spend its way out of depression, no more than it could during the 1930s. Today deficits are overwhelming and there is no hope the dollar can survive as the world’s reserve currency.

Economists and analysts are victims of Keynesianism and corporatist fascist dogma. They do not understand the intent and consequences of such an unworkable economic dogma. As well, if they step out of line and espouse the truth they are fired and permanently unemployable. They do not want to discuss the dotcom and real estate bubbles and the unbridled, unequaled scam of derivatives.

In our previous discussions of the European approach, which is austerity and higher taxes, we pointed out when consumers make up 70% of GDP you cannot take away purchasing power. If you do you have a depression. It is better to cut debt and deficits. This approach is a prescription for depression. In recent figures over the past 1-1/2 years it is evident that foreigners are finally realizing that it is time to leave the dollar.

Government, like the states, is broke and sooner or later taxes will be raised. One of the plum’s they go after, as we have discussed before, is your retirement funds. Behind the sense government and the Fed have already demanded that banks, insurance companies, brokerage houses and pension plans purchase US Treasury and Agency bonds. Those demands will grow into mandatory regulations. Remember, that now the Fed is a financial dictatorship. What is perceived, as a safe investment is nothing more than worthless paper.

For the past three years we have seen one bailout after another of the domestic and foreign lending institutions, which the public pays for and gets scraps in return, along with responsibility for the debt. It is not obvious yet, but many more banks are going to go under, and contrary to what visitors to CNBC have to say, some will be medium sized and larger banks. We do not believe the public will tolerate more lender bailouts and when they see the losses that will hit the FDIC they’ll be very unhappy. They know they will get to pay for that fiasco as well.

Financing of Treasury paper is getting more difficult. It has been fairly easy over the past six months due to the euro crisis and several of its members, which forced selling of euro bonds, the funds of which ended up in US Treasuries.

The next problem will be a further flight out of the stock market. That will send further funds into Treasuries, gold and silver, but once that is over it is all monetization by the Fed. The only help that might be in the pipeline could be other problem events similar to Greece, such as in Ireland, Portugal, Spain and Italy. Needless to say, every time the Treasury steps in, which it must, to buy unsold Treasuries, it increases the money supply and causes inflation. Eventually there is rampant inflation and higher interest rates, as investors leave dollar denominated assets. As the dollar falls in value gold and silver rise, as does the cost of imports, which causes price inflation. That is when real hyperinflation will take place.

When the dollar is no longer viable, Fed monetization of debt will accelerate and the trade deficit will be unpayable. Foreigners will stop shipping goods to the US and the cost of domestic goods will skyrocket. That will bring chaos, but from the point of view of elitists that is better than deflationary depression.

How do we short circuit such a scenario? We can start by bringing all of our military home and ending no-win foreign wars and depriving the military industrial complex of its fat profits and by cutting the cost of government by 1/3rd. Congress must re-legislate tariffs on goods and services and bring our jobs back home. We can accomplish that by kicking all the incumbents out of office. We also have to stop corporations from holding profits overseas tax-free. If accomplished American jobs would return home and America would flourish again. These are simple changes. If they are not forthcoming you had best prepare to fight in the streets. 

The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system. 

The Fed bought 14 of the 25 securities listed for possible purchase. The notes mature from August 2014 to February 2016, the Federal Reserve Bank of New York said in a statement today on its website. The New York Fed conducts open-market operations to implement the policies of the Federal Reserve System. 

“The Fed’s choice to reinvest the maturing coupons has put yet another structural buyer into the market, suggesting that this lower-yield environment is here to stay for the foreseeable future,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “That information was anticipated, priced in and we’ve now moved back to trading the fundamentals.” 

The Fed plans to keep holdings in the System Open Market Account, or SOMA, at about $2.054 trillion, the amount it held on Aug. 4, by using the proceeds from maturing mortgage-backed securities to buy Treasuries. The purchases are the Fed’s first attempt to bolster the economy in more than a year. 

Mortgage applications rose 13 percent last week as consumers refinanced at the lowest rates in decades.

The increase was driven by a 17 percent surge in applications to refinance home loans, the Mortgage Bankers Association said Wednesday. Those taken out to purchase homes fell by more than 3 percent. The numbers are adjusted for seasonal factors.

Home refinancing hit the highest level since May 2009, but was still lower than the last big boom during the first three months of that year.

Applications to refinance loans made up more than 81 percent of all home loan activity, the highest share since January 2009. Low mortgage rates have failed to spark home sales, which remain hobbled by the weak economy and tight credit standards.

Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.

The average rate for a 30-year fixed loan rose slightly to 4.6 percent from 4.57 percent a week earlier. The Mortgage Bankers Association’s survey covers more than 50 percent of all applications nationwide.

U.S. bankruptcy filings have reached the highest level since 2005, government data released on Tuesday show, as the economy slows and the unemployment rate hovers just below double digits. 

There were 422,061 bankruptcy filings between April and June, according to the Administrative Office of the U.S. Courts, up 9 percent from 388,148 in the prior three-month period, and up 11 percent from 381,073 a year earlier. 

For the year ended June 30, there were 1.57 million bankruptcies, up 20 percent from 1.31 million a year earlier. 

Consumer bankruptcies rose 21 percent to 1.51 million, and business bankruptcies rose 9 percent to 59,608. 

Quarterly filings surpassed 400,000 for the first time since a record 667,431 bankruptcies were begun in the fourth quarter of 2005, when Congress overhauled federal bankruptcy laws and made it harder for people and businesses to file. 

“We know the causes of bankruptcy are principally job losses and health care, with the overlay of the foreclosure crisis,” said Deborah Thorne, an associate professor of sociology at Ohio University. “It feels very unsettled, and I’m not surprised the numbers are going up. Until we get our feet on the ground, provide decent-paying jobs, and do something with the housing crisis, bankruptcies will continue to go up.” 

According to her website, Thorne has co-authored several publications with Elizabeth Warren, a candidate to run the new federal Consumer Financial Protection Bureau. Last Tuesday, the U.S. Federal Reserve said high unemployment, reflected in July’s 9.5 percent rate, as well as modest income growth, falling home prices and tight credit amid a contraction in bank lending were factors contributing to a slowdown in economic growth. 

Nevada had the highest rate of filings on a per capita basis in the last year, with 11.74 per 1,000 people, while Alaska had the fewest, with just 1.58 per 1,000. 

Among the most populous states, California ranked 7th in per capita filings, while Texas was 48th, New York 41st and Florida 15th. 

Real estate data provider Altos Research says its newest housing market report confirms what the company has been saying for some time: the mini “boom” of this spring was created by seasonal demand, with some extra help from the federal homebuyer tax credits. “Now that those are gone, buyer activity has all but come to a standstill,” Altos said in its Real-Time Housing Market Update released to the press Monday.

The analysts at the California-based firm warn that the industry should brace for rapidly rising inventory and continued home price pressures in August and into the fall of 2010. The Altos 10-city composite of home prices is already showing signs of pricing weakness, the company reports. Its latest market data show that home prices dropped 0.63 percent across the 10 major markets included in the composite reading during the month of July, to an average of $474,946. 

(Altos’ 10-city composite includes Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington D.C.)

The Altos Research 10-city composite index shows that, nationally, more than a third of all homes listed for sale reduced their prices in July 2010. The company says asking prices for homes actually fell in 19 of the 26 total markets it tracks, with the most significant declines in Miami (3.37 percent), Washington, D.C. (4.14 percent), and Phoenix (5.14 percent).

At the same time, inventory across the board is rising steadily, with 22 of 26 major markets showing increases. According to Altos’ study, the sharpest inclines were in Phoenix and Washington, D.C., up 5.07 percent and 5.67 percent, respectively.

“Inventory levels are similar to last year at this time, but were declining then and are increasing now,” Altos said in its report. 

The company notes that although mortgage rates are at all-time lows, buyers still aren’t being swayed to make purchases. Altos say the increases in inventory nationwide show that demand simply isn’t there. “As the market continues to correct itself, and as we head into the seasonally weak fall and winter months, expect more increases in inventory, and likely deepening declines in asking prices,” according to Altos’ analysts.