Bob Chapman: Euro on the Way Out: Scramble to Devalue Currencies

Goldman Sachs wants to settle with the SEC exactly as we predicted. They would neither admit nor deny and be fined $1 to $ 2 billion, which is chump change to them.

Lehman is seeking return of $8.6 billion that JPMorgan Chase seized before Lehman filed for bankruptcy. The claim is Morgan had unparalleled inside knowledge. There is no honor among thieves.

Part of the deflationary mode is borrowers are paying down debt and saving at a 3.4% rate. It could be the elitists, as we speculated months ago, want to take down the entire world financial system in the next 1-1/2 to 2 years. Hi Ho stimulus. The fiat Ponzi scheme is collapsing.

Irrespective what the Illuminists and their minions say in Europe the euro is on its way out. It could take two years, but this unnatural creation deserves burial. There still is a scramble to have a big conference in a year and devalue currencies and write off debt to default. We do not think they can pull it off. Austerity programs will only accelerate to process. By the end of the year EU trade will contract and at best remain stagnant. There is really no relief in sight for Europe. Who can blame the Germans for wanting out? The world is going upside down.

During the past few months the financial world and nations have been consumed with the problems of sovereign debt and so they should be. Debt is a worldwide problem, but that problem has been exacerbated by the ability of banks, brokerage houses and insurance companies to manufacture derivatives.

The Greek tragedy continues as the IMF and others get ready to fund not only Greece, but all the PIIGS as well. That includes Canada, the UK, which has refused to contribute, because they are broke, and the US whose end will be about $60 billion. Greece is rolling their old debt in order to bail out the banks. It won’t be long before Spain, Portugal, Ireland and Italy will be doing the same thing. The other euro zone members are saying why should we bail out these countries, which in turn are bailing out banks?

These euro zone countries are saying all we did was what everyone else was doing. Governmental debt has hit unprecedented levels worldwide. It is now called a sovereign debt crisis. Any recovery in any of these countries will remain anemic as long as this situation exists. More debt is being created via stimulus in some countries, and in others austerity has begun. In the US real growth is only 1.3%, and that is fading fast having fallen from 6.5% in the fourth quarter.

The top participant was penalized in 1985 at the Plaza Accord and in 1987 at the Louvre Account and as a result entered depression in 1992. That is Japan. Their debt is now 200% of GDP. Structural impairment still sticks out like a sore thumb. They are trapped in the same quandary, as Europe is, growth via debt. It is interesting to note that if global military spending of $1.5 trillion ended there would be o trouble funding debt. The US spends more than $600 billion a year, or over 40% of the world’s total, so they can bludgeon the world’s inhabitants into doing what the US wants them to do, it is called tyranny.

The foregoing is certainly not growth. Growth has to come from the development of domestic markets, not as it has been or is today via foreign trade and the endless creation of debt. The experiment of free trade, globalization, offshoring and outsourcing hasn’t worked. Look at what it has done to the US economy. It has gutted it. It has been based on the exploitation of what is essentially slave labor and the theory of comparative advantage. This method of impoverishing the US economy has been funded by the workers themselves via their savings and those of their pension plans. Instead of transnational conglomerates working with foreign governments to keep wages low they should be working to increase them. That never occurred to the Illuminists who run these corporations, nor governments such as China. As a result we have had the opposite effect. Slightly higher wages in China and much lower wages in the US. The ultimate result is going to be tariffs on goods and services to level the playing field.

The euro for Greece and others works both ways. The weaker members acquire a stronger currency and as a result a stronger economy based in part on the strength of its fellow members. Thus, Greece surrendered its sovereignty for the ability to create domestic debt. Unfortunately they cannot print euros, so they cannot devalue. Instead they default unless subsidized by other members.

The dollar had been probing lows on the USDX at 74 just several months ago. In order to solve the dollar weakness and sap euro strength a crisis was created. From out of nowhere Greece was exposed for its debt. Before this took place starting in October major NYC banks were accumulating dollars, because they knew what was going to happen, because they planned it that way. Do not forget Goldman Sachs knew all of Greece’s secrets – they created them.

The events in Greece have left many European banks badly exposed and riding to the rescue has been the Fed with a new swap facility. Last time, over 15 months, the Fed says they used $583 billion. The Fed is again printing money from out of thin air to be used by foreign nations to rescue European banks. They, of course, would have us believe it was to save the European financial structure, when the move was to save private banks that should have never made loans to Greece and other PIIGS, nor purchased their bonds. As professionals they knew better. Effectively the American taxpayer is funding these banks and they pay the price for this via inflation and greater debt. The Fed is further debasing the dollar.

As a result of what the public would call hocus-pocus, the price of gold has been rising. There are other factors making gold rise, but this is the latest. Finally professionals are paying attention to these problems, but more importantly, that the “President’s Working Group on Financial Markets” is manipulating all markets, but particularly the gold and silver markets. It won’t be long, within two weeks that a class action lawsuit, one of many by silver owners, will be filed against JPM Morgan Chase for manipulating the silver market. That should get Wall Street’s and Washington’s attention. This kind of suit is very difficult to defend against. Like Barrick Gold not many years ago, they admitted taking direction from the US government for hedging in the gold market, so will Morgan defer to the US government to explain their actions. Irrespective, Morgan will lose and the manipulation of the silver market and probably the gold market will end.

It should also be noted that the CFTC was complicit in this criminal activity. They had all the evidence and had to be forced to investigate. The Justice Department was forced to investigate as well.

This swap being done by the fed on the short-term could be somewhat injurious to gold, because the recipients are very liable to use some of those funds to short gold and silver. 

          As we explained earlier there is a fight going on between the dollar and gold for currency supremacy. The recent dollar rally was part of the plan to keep the dollar as the preferred asset or currency. It didn’t work all that well because gold rose more than the dollar. The dollar swap will be used to keep European banks from going under and that is inflationary. The Fed is obviously buying their subprime assets. The bank proceeds from the garbage sold to the Fed will in all likelihood be used to purchase US Treasuries. In a late note now that Fitch has lowered Spain’s credit rating from AAA to AA+, they’ll be even more pressure on European banks and government for Fed assistance. Now not only are the banks broke, but so are the governments. That said how could Treasuries be a store of value? They cannot thus; sooner or later professionals will be storming the gold parapets. If you think markets are currently volatile, just wait you haven’t seen anything yet.