The US dollar heads relentlessly down so there has to be many official sellers; China, India, South Africa, Mexico, and Russia, etc. Japan is stuck. They made their deal after WWII and they are stuck with the deal and the dollars, all $720 billion of them, although the master-slave relationship could begin to fray. It already has come apart to an extent in Asia with the exception of Taiwan, which is essentially a US protectorate similar to Canada. One of the lessons to be learned here is to make sure your trade imbalances do not get too far out of line. Asians think life is a one-way street. On the other hand, US elitists never complained when cheap Asian goods kept US inflation down during the last ten years. The Asians also printed currency to buy dollars to keep the value of their currencies down. Thus, there is plenty of blame to go around. This attitude has expedited. US borrowing from abroad this year is $620 billion, a record 5.7% of all economic activity. As a result, foreigners, particularly Asians, have been left holding the dollar bag. This is 49% of American governmental debt. China may be only holding its debt having only purchased US Treasury securities of $16.4 billion this year. That will cause higher interest rates, a slowing US and world economy that will shortly lead to recession then depression.
Whether Japan likes it or not their yen is headed to 80 to the dollar. They have been playing the same game as China and others for years, keeping their currency cheap. Now they all will incur 30 to 50% losses on their US dollar holdings. You are only seeing a trickle of dollars now, but wait until it picks up and wait until panic sets in. Many may sell and cut some losses or the majority of losses, but China, Japan, Taiwan, Hong Kong and South Korea are in a tough spot. Business-wise it cuts just as deep. For every one yen appreciation, Toyota loses $195 million.
All these nations are looking for US fiscal reform, a reform that will and cannot ever come. It is financially and politically not feasibly. The world is headed for an economic and financial purge that has to come. There it is in spades. Read it and weep. Thank goodness, at least you have been forewarned.
There were rumors last weekend that the US would not interfere in the currency markets until the dollar reached $1.45 to the euro. Sources said it helped to underscore the markets belief that the US had no plan to stop the dollar’s slide, despite its avowed strong dollar policy. You can expect to see pressure on the dollar every time there is a negative economic or financial announcement regarding the US economy; and there are plenty of those in store for the future. The dollar has lost 10% of its value against the euro since September. Expect the grind in the dollar downward to continue for some time to come.
As a veteran and a patriotic American, not George Bush’s version, I am appalled at our government’s use of torture. Our country has been opposed to torture since its founding. One of our founding principles is that cruel and unusual punishment is both illegal and wrong. In fact, we grade other countries in their support or violations of human rights, yet we are torturing people. That is two faced and disgusting. As we know it, America starting practicing human abuse after WWII when we held a number of Germans in concentration camps after the war. Eisenhower hated Germans and his command allowed over a million German soldiers to die from inadequate facilities, clothing, medical care and food. This time we began torture exercises in Guantanamo, Cuba, away from public view or in the jails of Iraq and Afghanistan. Now we assumably will have Alberto Gonzales as Attorney General, who recently wrote the book on the subject and how it was legal and sanctioned. We, as Americans, are responsible for what our government does. We have jailed and tortured these prisoners in Cuba for three years. They have never been charged and in some instances, we did not know who they are. Why are we allowing our government to act this way? Where are our ministers, priests and rabbis? Why are they not speaking out? Are they waiting for the return of Dr. Mengele? Even if our enemies do the same thing, are we to fall to their level of bestiality? Go to your elected representatives and tell them to stop this horrible practice.
Mr. Bush is going to appoint Bernie Kerik to replace Tom Ridge as the head of Fatherland Security; Kerik was bodyguard for Rudy Guilliani, errand boy for the Saudi Royal Family and an exploiter of the 9/11 tragedies. Kerik is an idiot and maybe that is good, he might do less harm. Kerik is a scumbag.
Our illustrious President has challenged International leaders to create a “new world order,” declaring pre-9/11 multi-lateralism outmoded and asserting that freedom from terrorism will only come through pre-emptive actions against enemies of democracy. His three goals are: reforming multi-lateral institutions, which we believe means fascist dictatorial government, prosecuting the war on terrorism that really does not exist and spreading what passes for democracy from the White House. He says, “Defense alone is not a sufficient strategy. There is only one-way to deal with enemies who plot in secret and set out to murder the innocent and the unsuspecting. We must take the fight to them.” This is what George W. Bush had to tell his audience in Nova Scotia last weekend and, of course, it was parroted by Paul Martin, Canada’s P.M.
Early this week we saw the Fed’s hands in the bond market desperately trying to hold down yields. Last week the ten-year US Treasury’s yield moved up to 4.45%. Within three days, it was back to 4.25%. This is not a normal movement. The ten-year yield should be much higher than it is to compensate bond investors and traders. It is impossible to have yields falling as the dollar falls unless there is manipulation. When a currency is in trouble investors demand a high return. Not in American markets where Alice in Wonderland reigns. In addition, can bond traders, the smartest of the smart, really believe government inflation figures? We do not think so. We believe the Fed is overpowering the ten-year via the repo pool. Their effect can only be temporary. Long-term rates are headed higher soon.
The Wall Street Journal tells us Foreign Direct Investment has collapsed since 2000 from a peak of $314 billion in 2000, to $29.8 billion in 2003. That is down 90%. In 2003, for the first time, China attracted more FDI than the US, $53 billion. This comes as the US share of world FDI inflows fell to only 5.3% in 2000, from 22.6% in 2000.
The Pentagon has admitted the war for the “Hearts and Minds” in Iraq is now lost. The war on terror and the invasion and occupation of Iraq has increase support for al-Qaida. It has made ordinary, previously uncommitted, Muslims hate the US and has caused a global backlash against America because of the “self-serving hypocrisy” of George W. Bush’s administration over the Middle East. Worse yet, what the elitists have done has achieved the opposite effect of what they intended. American direct intervention into the Muslim world has paradoxically elevated the statue and support for radical Islamist. The overwhelming majority voices their objections to what they see as one-sided support in favor of Israel. All our government has ended up with is tarnished credibility and the way the elitists pursue their goals. Finally, their modes of operation are recognized as an arrogant, hypocritical, self-serving and self-indulgent. America has become the antithesis of the Muslim world due to its relationship with Saudi Arabia, an oil kingdom run by despots.
Paul Volcker, former chairman of the Fed, warns that there is a 75% chance of a dollar-fueled financial crisis within the next five years unless Washington adjusts its economic policies. This is due to our bloated current account deficit. Higher foreign currency values will help, but they will cause big inflation in the US as the cost of goods imported into the US rises. The real problem and the reason why the lower US currency will not accomplish the goal of a lower current account deficit is that, US transnational corporations continue to ship whole industries out of the country and outsource employees, and unless that is reversed and protective tariffs put in place, the deficit will not drop any substantial amount. Americans can consume less, pay off debt and save, but that means major unemployment, probably 35%, it’s 13-1/2% now, and depression. As you can see, there is no way out of the problem without a great deal of pain, even if the public does the right thing. The problem has gone too far. At 5.7% of GDP the current account deficit is out of hand and worse yet, it could go to 7% before the financial tide is turned. We are consuming far more than we are producing, and spending far more than we are earning. Economists are now uniformly telling us we need a foreign inflow of $2.6 billion a day to keep the American economy afloat. Already foreign investors have lost faith and if it were not for foreign central banks, the US would already be underwater.
This is the same type of solution that existed in 9/87 when Germany backed off on buying US debt and others followed. Only this is 100 times worse. That event was followed by Black Monday, the worst one-day percentage loss in US stock market history. In 1988, via executive order, “The Working Group on Financial Markets,” the “Plunge Protection Team” was formed and the Fed was allowed to rig markets with impunity. The scenario is the same, but 100-times worse today and confidence, than as now, is being lost. Foreign investors are losing confidence in the US dollar’s stability and it’s increasingly doubtful that the American economy can absorb the current account imbalance, as money deserts US Treasuries and into foreign currencies and gold.
** Receive an Introductory Copy of the IF -- See Below **
More for subscribers....
GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS
We are now convinced the gold suppression cartel has lost its control of the gold market. Our calculations put official gold holdings at about 5,000 tons. Gold is an alternative currency to the dollar. The dollar has been falling, continues to fall and it will fall lower. As long as the dollar goes down or does not go up, gold will rally, especially when gold should be selling at $850 an ounce now, not $455 an ounce.
The question arises, why are quality gold shares not going up as gold moves higher? The simple answer, which we passed on to you last week is, hedge funds and other investors are buying gold bullion long and shorting gold shares as a hedge. Many funds and other professionals, as well as the average investor, sell calls against their long gold share positions. This is why gold shares are not presently performing the way we would like them to. Of course, when they do not perform, the junior shares and exploration shares do not perform either. Once hedge funds sell bullion, they will buy back in gold shares, so you could have gold bullion correcting and gold shares moving higher. As an excuse to avoid gold shares or to recommend against them, analysts say they have too high a price earnings ratio (P/E), when in fact as the price of gold moves higher the leverage of shares is enormous. Their costs rise only marginally as their earnings catapult and gold rises. There soon will come a time when stocks, bonds and real estate will be headed down and the only leveraged game in town will be gold shares. If gold is going to continue in a bull market, then shares have to participate just as numismatic coins will participate. Hedgers and option sellers have made gold shares cheap, which means that you should be buying and hold them. This is a guaranteed win. Remember, the trend is your friend.
The latest on platinum is that demand will grow less than 1% and the platinum market will have been very close to balance in 2004. Demand for the automobile and glass industry will be largely offset by weaker demand for jewelry due to price sensitivity. In 2005, Johnson Matthey predicts that supplies will expand faster than demand so that the market will move into surplus for the first time in six years. This should make platinum trade in a range of $760 to $880 per ounce over the next year.
Palladium will have another one million ounce surplus in 2004. This will certainly cap the price, and may very well send it lower as platinum moves lower. Demand is expected to rise by 730,000 an ounce to 6.14 million ounces. Well, if it were not for the introduction of palladium jewelry in China, the demand would have been lower. Supplies for 2004 are expected to rise by 700,000 ounces to 7.16 million ounces. We believe the price in 2005 should trade between $240 and $200 an ounce. With these facts in mind, and a drop in auto and glass production, prices of both platinum and palladium could trade lower than our estimates.
All those experts on gold, who recommended the sale of gold around $420, are still recommending selling.
The Germans have been big gold buyers over the holiday season.
Pierre Lasonde of Newmont has sold all his gold share holdings. You might ask him why he did so.
The new ETF, Exchange Traded Fund, GLD has recently reported gold bars with duplicate numbers, an unheard of condition. They consist of 2.2% of assets. Again, we do not recommend the purchase of GLD.
It is so very important that we repeat it again, do not buy GLD the gold ETF. It is being used as a tool to manage the price of gold. This outcome is made possible because gold supposedly owned by GLD, but stored with the sub-custodians, cannot be verified to exist. The bars cannot be audited. They cannot even be inspected. The whole episode is a scam. None of the bars supposedly in safekeeping exist. We also advise not to be involved in any fiduciary, such as a mutual fund that holds GLD. You may be holding an empty bag.
We found it of great interest that www.thebulliondesk.com allowed an unsigned editorial, defending the World Gold Fantasy Council’s Exchange, traded bullion funds against criticism and questions regarding whether they, in fact, have gold bullion. What useless knave would write an article and be so ashamed of what they wrote that they would not put their name on it? Worse yet, what weasels would allow such a slanderous piece to get into print without identifying the author. Thus, we think you should think twice about patronizing their site. We have to assume, in the absence of authorship, that www.thebulliondesk.com is acting in behalf of the World Gold Fantasy Council, the Gold Suppression Cartel or the Central Banks. We think the conspiracy has gotten caught with their pants down.
The ongoing saga of deception continues as the World Gold Fantasy Council’s, Exchange Traded Fund (ETF), Street Tracks, dumped 15 tons of gold into the market, starting a $20 downside run, that culminated in a loss of $14.70 for the day, putting the gold price at $436.80. Simultaneous the precious metal cartel forces attack silver, sending it down $.74 to $7.08 an ounce. Now you can see what the ETF is all about. It was created by the gold suppression forces as another tool to manipulate the gold price. This is a gold fund that is advertised to track gold prices. This massive sale of gold overnight was not tracking prices; it was creating prices. We also find it of special interest that when the ETF bought 103.56 tons of gold the market never moved, which leads us to believe they never bought the gold. They positioned themselves in derivatives. Those 15 tons of metal may well have been all they had purchased. The WGC, GFMS and a group of financial writers have been working on this project with the SEC, the Treasury Department, the Plunge Protection Team, and the Fed to be used as a further tool to control gold prices. As anti-gold as government is, they never would have allowed the SEC to approve such a vehicle unless they intended to use it to their advantage. The commentary of the Bullion Desk’s Ross Norman was just disinformation, yellow journalism, dishonorable and a disgrace. It is obvious who he works for, the gold suppression cartel. If the ETF had no gold at all, the SEC could be allowing naked shorting, which is illegal. We also find it of interest that the ETF’s sell executions happened overnight and were immediately followed by a US dollar rally. We do not believe in coincidence, thus, we believe the whole scenario was staged and coordinated. The prime intent is to demoralize those who were long gold, silver and dollars. Of course, the technicians who were bad-mouthing gold for weeks set the stage to allow the cartel and the government to launch their attack. It was also obvious that the cartel, as well as speculators, had been hammering listed gold and silver shares for a month, also helping to set the stage for the onslaught.
** Receive an Introductory Copy of the IF -- See Below **
More for subscribers....
SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $129.95 U. S. Funds.
Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951. Please include name, address, telephone number and e-mail address. We accept Visa and MasterCard charges. Provide us with your card number and expiration date. We will charge your card $99.95 for a one-year subscription. Note: We publish twice a month by surface mail or 3-4 times a month by E-mail. Correspondence to Bob Chapman international_forecaster@yahoo.com, or for subscription information IF_distctr@yahoo.com
Foreigners please use foreign U.S. dollar denominated checks or Money Orders.
The views contained here may not represent the views of CapitalUpdates.com,
its affiliates or advertisers. CapitalUpdates.com makes no representation,
warranty or guarantee as to the accuracy or completeness of the
information (including news, editorials, prices, statistics, analyses
and the like) provided through its service. Any copying, reproduction
and/or redistribution of any of the documents, data, content or
materials contained on or within this website, without the express
written consent of CapitalUpdates.com, is strictly prohibited. In no
event shall CapitalUpdates.com or its affiliates be liable to any person
for any decision made or action taken in reliance upon the information
provided herein.
International Forecaster December, 2004 (#3) - Gold, Silver, Economy + More
