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.