Friday, January 30, 2009

Private equity investors and professionals are pulling their money out of Banks

By Bob Chapman The International Forecaster1-29-9
The following are some snippets from the most recent issue of the International Forecaster. For the full 37 page issue, please see subscription information below. US MARKETS ... We are not going to belabor this point but it is deadly important. Private equity investors and professionals are pulling their money out of banks. A professional run on banks has begun. If you have CDs or funds in banks that exceed six months of operating expenses remove them immediately. Your alternative is gold and silver related assets or Swiss franc Treasuries. If you need help email me or call 1-800-375-4188.

Our Treasury is going to have to raise over $2 trillion to fund fiscal needs in the next six months, which will be no easy feat. Will foreigners continue to fund such massive reckless spending? We do not know. We do not believe they want too, but do they have much choice? They are holding 64.5% of their foreign reserves in US dollars.

The US Treasury's needs for funds are enormous and fulfilling those needs will be very difficult. Are US Treasuries still the world's safest investment? We do not believe they are. Today this is a false perception, as it has been several times in our history. History is replete with other major nations defaulting on their bonds and arbitrarily devaluing their currencies in the last 150 years. The bottom line is there are no safe bonds or currency from any nation. Gold always has been and always will be the only safe option.

Today we have zero interest rates or for that matter negative rates if you consider the loss via real inflation. Owners of US debt are losing at least 10% annually on their investment. Our unprecedented expansionary monetary policy can only end in disaster via hyperinflation and default and devaluation. Even a 10% yield in today's market cannot compensate for the loss in buying power.

The creation of American debt is totally out of control and there will come a time when foreigners will be forced to say no - no more. They will be under enormous pressure from their own constituents. Besides, who is capable of funding such debt? China and Japan are loaded up. Oil producers are in a bind. England is on the edge of bankruptcy, as are Ireland and Spain. Perhaps Germany and France can help. We do not know who'll attempt to help, but more than $2 trillion in a year is a lot of money. We do not think it can be done and that means the Fed buys the Treasury's bonds, bills and notes by creating more fiat money monetizing the debt and sending inflation straight into the stratosphere. That means much higher gold prices are in our future.

There is no flight to the dollar. There has been a flight from other currencies to the dollar for several reasons and those reasons are now history. We could see the dollar again test the upper limits on the USDX at about 88, but that should be it. We expect the dollar to firmly put in a double top. In fact, we may well never get to 88, which often happens in situations like this. The dollar has gone up as much as it is going too.

Can you imagine what a dollar at this level will do to exports? It will probably cut GDP % to 1%, and at this stage that would be most unwelcome. The dollar is going lower versus other major currencies, which have all just fallen versus the dollar over the past five months. Next all the currencies will take a bath versus gold.

As an aside, events in Europe are horrible. England and Europe are trapped in depression and England is bankrupt. In Greece and in the Baltics and South Balkans they are having the worst riots in almost 20 years. S&P has cut Greek debt to near junk and the bonds of Italy, Spain, Portugal and Ireland are on negative watch.

As we told you before this is a worldwide catastrophe. There will be no decoupling. Ireland has nationalized the Anglo Irish Bank, the biggest bank in the country. The social fabric is being torn as it soon also will be in the US and other countries. The entire world is entrapped in a web created to bring about world government...
Read more: Professional Run On Banks Has Begun - Chapman

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