Bob Chapman | February 7, 2009

Obama's stimulus plan, aka the Political Payoff Plan or PPP, together with the second half of the TARP, aka the Paulson Ponzi Plunder Plan or PPPP, will deliver a shot in the arm to our economy that will be both brief and shallow, sending us careening on our way to hyperinflation, which will deepen the depression we are already in by sending interest rates skyrocketing and killing off what little business activity remains. Interest rate swaps, with notional principal in the hundreds of trillions, will also implode at that time, administering the coup de grace to the world economy and financial system from which the Illuminati hope to form their one-world government, economy, currency, feudal society and religion.

The Illuminati may use the brief upsurge derived from the PPP and the PPPP as an opportunity to complete the Big Sting Two, where they dump their dollar-denominated paper assets in favor of tangible real assets via dark pools of liquidity and unregulated OTC markets out of the view of both regulators and the public, leaving all the non-insider sucker-dupes holding the bag full of the worthless fiat currency known as Federal Reserve notes (aka toilet paper) or paper assets denominated in such. Dollar surplus nations who are tight with the Illuminists will be allowed to go on a spending spree and join in on the fun by spending their once-sterilized dollars, and this will then very seriously aggravate an already deadly bout of hyperinflation. You won't know about what these other nations are doing, however, because the Illuminist-controlled FTC no longer publishes figures about foreign investment in the US. How incredibly convenient.

When the Big Sting Two is set into motion, gold and silver will then go on a moon-shot, and if you don't own any, you will be financially vaporized, and join the ranks of the other crispy critters who were too dumb to recognize that gold and silver are the only real money in this world. The Illuminati are certainly aware of this fact, as they all collectively own tens of thousands of tons of gold and silver, which they have looted from their own central banks by stealing it outright, like the Rockefellers' likely looting of what is now an empty Fort Knox, or by purchasing it at bargain-basement prices, like the Rothschilds' purchases from Gordon Brown's big gold giveaway of the UK's national gold reserves via planned and publicly announced auctions at the bottom of the market. The Illuminati have accumulated these tens of thousands of tons over many centuries. This is their failsafe money and their possible backing for a world currency. This is not a situation where, if you can't beat them, then join them. This is a situation where you can beat them by joining them. If you send gold and silver to new heights before they can bail out of their paper assets, you will deal a serious blow to their plans for world government! Buy, baby, buy!!!

Our Treasury plans to borrow $493 billion in the first quarter versus a forecast of $368 billion.

Our new president believes our Fed Chairman, Ben Bernanke, will wave his magic wand and with his genius will save our economy and financial world. Unfortunately, Mr. Obama doesn’t realize that the elitist goal is not to save our country, but to destroy it. Who in their right mind would even talk about using the printing press to save the financial system, or dumping money out of helicopters. Being cavalier should not be the province of an economist. Ben, in his speeches, conveniently forgets to tell listeners that he has increased the monetary base from $1 trillion to $3 trillion in just five months. He is a modern day Hercules, he is.

Needless to say such policy ignites hyperinflation, which in turn puts downward pressure on the dollar. The infusion of capital into the finance industry along with the increase in money and credit has not tempted banks to increase lending. That monetary base is huge, yet no credit expansion.

Soon inflation will accelerate and normally Mr. Bernanke would withdraw cash from the system, but he does not have that luxury this time, because of the continually downward pull of deflation and asset destruction. The implied safety of the dollar is already being questioned as we see both short and long-term interest rates rise. Once these rates rise higher tremendous pressure will be put on the dollar and borrowing costs will rise. These higher rates, as they rise, will attract lenders to some degree.

Money is never neutral. As it enters the system it increases demand for goods and services. Presently you have seen a large drop in retail sales. Can you imagine how large that drop would have really been if this onslaught of money and credit had not been created? This injection also creates malinvestment, which as the boom ends creates more terrible problems, as unemployment rises further, wages fall and the dollar comes under further pressure. These massive monetary injections distort the financial and economic structure making the final outcome much more devastating. Central bankers fool themselves into believing that they can control what they are doing when in fact they have no real control.

The big question is when will some foreign nations break ranks and become dollar sellers? We believe that will happen when Treasury sales fail and debt has to be monetized by the Fed. Then the panic will begin. This is why you have to be long gold and silver assets now, so you do not get left in the dust.

Harry Markopolos, a former money manager, who sought to convince regulators for 9 years that Bernard Madoff was a fraud, said the SEC suffers from investigative ineptitude. He is too kind. The SEC was in on it. They knew what was going on. They protected the fraud. They protect all the connecteded insiders. They only close down small brokerage firms, small brokers and newsletter writers. They knew all about Enron as well. These are the same people at the SEC and CFTC who refuse to uncover the manipulation of gold and silver.

Markopolis gave the SEC a beating they’ll never forget. Unfortunately, he doesn’t know what we know. If he did he could have tied it all together and put a red bow around it.

The FDIC just three months ago said that $40 billion would carry the fund from 2008 to 2013. Magically that figure has jumped to $100 billion.

Late payments on credit cards has topped record levels and defaults rose sharply to just below all-time highs last month as consumers struggled.

The latest report on China’s holdings for the end of 2008 are $900 billion in Treasury bonds and $600 billion in Agency bonds. They have another $150 in corporate bonds, $40 billion in US equities and $40 billion in short-term deposits. That is $1.72 trillion.

The US Treasury on Wednesday opened the floodgates of government bond issuance, revealing plans for a record debt sale in February and more frequent auctions in the months to come.

The announcement came amid growing fears about US government deficits and sent the yield on the benchmark 10-year Treasury note rising to 2.95 per cent, up from just over 2 per cent at the end of December.

The rise in Treasury yields has been pushing mortgage rates higher, complicating efforts to revive the economy. The US Federal Reserve said last week it was “prepared to” buy Treasuries if that would be a “particularly effective” way of reducing private borrowing costs.

The Treasury said it would sell $67bn (£46bn) in new securities next week, the largest ever quarterly refunding, beating the last peak in August 2003. It may also start monthly sales of all its benchmark Treasury securities.

At the end of February, the Treasury will start selling seven-year notes every month for the first time since the issue was discontinued in 1993. Sales of 30-year bonds will double to eight times a year and the Treasury will say in May whether the bond will be sold every month.

The Obama administration, aiming to overhaul the $700 billion financial-rescue program, is refocusing on an effort to guarantee illiquid assets against losses without taking them off banks’ balance sheets.

Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold the toxic securities, an option that still may form part of the final package, people familiar with the matter said. Senator Charles Schumer yesterday said debt guarantees are becoming “a favorite choice” of options because a bad bank would be too costly.

The cost of President Barack Obama's economic recovery plan is now above $900 billion after the Senate added money for medical research and tax breaks for car purchases. [We all know that eventual costs always greatly exceed original estimates.]

US taxpayers may be stuck with losses on $30 billion of Bear Stearns Cos. assets owned by the Federal Reserve even though the central bank has said otherwise, according to Robert A. Eisenbeis, Cumberland Associates Inc.’s chief monetary economist.

“There is no prospect for a profit on the assets,” Eisenbeis wrote in a report yesterday. “Losses are mounting.”

No wonder the Fed will not reveal its holdings! And how about all those TARP apologists braying that taxpayers would make money on the crappy paper that no one else wants!

The US Senate voted on Wednesday to soften a ”Buy American” plan in its $900bn stimulus bill after President Barack Obama expressed concern the original language could trigger a trade war. They are gutless.

Senators, on a voice vote, approved an amendment requiring that provisions that upset Canada, the European Union and other trading partners be ”applied in a manner consistent with US obligations under international agreements.”

Delinquencies on U.S. credit cards rose to record highs in January as the economic recession weakened consumers' finances, Fitch Ratings said on Wednesday.

Payments at least 60 days late measured by a Fitch index rose 0.47 percentage point to 3.75 percent last month, after accelerating in the fourth quarter, Fitch said in a statement. The previous record was 3.73 percent in February 1997.

"U.S. consumers continue to struggle in the face of mounting pressures on multiple fronts, from employment to housing to net worth," Michael Dean, a managing director at Fitch, said in the statement.

Concerns that the U.S. recession will deepen as foreclosures rise and businesses lay off thousands have sparked a flurry of unconventional moves to spur growth, including credit-easing measures that have already doubled the size of the Federal Reserve balance sheet to more than $2 trillion.

A Fed program to lend up to $200 billion to holders of ABS backed by new or recently issued consumer loans is expected by analysts to boost availability of loans for autos, education and credit card balances.

But rising delinquencies and charge-offs by credit card companies will hurt performance of asset-backed securities (ABS) supported by credit card receivables, Fitch said. But downgrades are seen limited in the near-term, it added.

Total charge-offs on prime, general purpose credit cards from the December collection period rose 0.66 percentage point to 7.5 percent, up 40 percent from a year earlier and the highest since bankruptcy reforms caused a spike in 2005, according to another Fitch index.

Fitch estimates charge-offs will near 9 percent by the second half of this year.

Retail store credit card delinquencies rose 0.12 percentage point to 5.2 percent, though the rate of increase has slowed for the second month. Charge-offs on retail cards were flat at 10.51 percent, 44 percent higher than a year earlier.

The unemployment rate climbed in nearly all of the biggest urban areas in the U.S. during December.

The U.S. Labor Department Wednesday said jobless rates rose in 363 of the 369 metropolitan areas compared to a year earlier.

Elkhart-Goshen, Ind., had the largest jobless rate increase from December 2007, up 10.6 percentage points to 15.3%. At second place, Dalton, Ga., rose 6.2 percentage points to 11.2%. Both areas were struck by manufacturing layoffs. On Friday, the Labor Department will release its January employment report; economists see the unemployment rate rising to 7.5% from 7.2% during December, with non-farm payrolls shrinking by 524,000 jobs.

The Institute for Supply Management said its non-manufacturing index came in at 42.9 in January compared with 40.1 in December.

The level of 50 separates expansion from contraction. The index dates back to July 1997.

Economists had expected a reading of 39.0, according to the median of 75 forecasts in a Reuters poll, which ranged from 37.0 to 44.0. The service sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants.

U.S. commercial property prices by institutional investors posted their greatest quarterly fall in 22 years, according to an index developed by the Massachusetts Institute of Technology Center for Real Estate.

The transaction-based index, which MIT developed in 1984, fell 10.6 percent in the fourth quarter, surpassing the record fall of 9 percent seen in the fourth quarter 1987.

The index tracks the prices that institutions such as pension funds pay or receive when buying or selling commercial properties like shopping malls, apartment complexes and office towers.

"It now seems likely that this down market will be at least as severe as that of the early 1990s for commercial property," Professor David Geltner, director of research at the Center for Real Estate, said in a statement.

The index fell a record 15 percent in 2008, and easily surpassed the 9 percent decline seen in 1991 and the 10 percent drop in 1992.

That period marked one of the most severe recessions in commercial real estate recession and was the result of the savings and loan debacle and U.S. tax code changes in 1986.

The current downturn in commercial property is the result of the credit crisis, which has cut off debt financing for sales. The U.S. recession has also dealt a blow to commercial real estate returns, as business tenants cut staff and office needs, cut hotel demand, or close stores.

The index declined a total of 27 percent from 1987 through 1992, with most of the decline occurring in 1991 and 1992.

The index's performance means that prices in institutional commercial property deals that closed during the fourth quarter for properties such as office buildings, warehouses and apartment complexes are now 22 percent below their peak values attained in the second quarter of 2007. The index has fallen in five of the past six quarters, but the recent drop is by far the steepest.

The MIT Center for Real Estate also compiles indexes that gauge movements on the demand side and the supply side of the market that it tracks.

The demand-side index, which tracks prices potential buyers are willing to pay, has fallen for the past six quarters, and is down 23 percent for the year and 31 percent since its mid-2007 peak.

California today was branded the worst credit risk of all 50 states, after Standard & Poor’s cut its rating on the state’s debt because of the budget impasse.

S&P lowered its rating on the state’s $46 billion in general obligation bonds to "A" from "A-plus," citing "the state's inability to reach an agreement on a mid-year budget revision and its rapidly eroding cash position."

Until now, California and Louisiana had been tied for last place, at "A-plus," on S&P’s state ratings list. Most states are rated either "AA" or "AAA."

The volume of applications filed to refinance mortgages increased 15.8% last week compared with the week before, as applicants looked past higher mortgage rates, the Mortgage Bankers Association said Wednesday.

Applications for mortgages to purchase homes fell down a seasonally adjusted 11.2% for the week ended Jan. 30 as opposed to the previous week, according to the Washington-based MBA's survey. It covers about half of all U.S. retail residential mortgage applications.

The combined volume of home-purchase and refinance applications rose a seasonally adjusted 8.6% on a week-to-week basis. The four-week moving average for all mortgages was down 9.2%.

Total application volume was down 26.9% on an unadjusted basis compared with the same week in 2008.

Refinancings made up 73.2% of the total applications filed last week, up from 72.8% the week before. Adjustable-rate mortgages accounted for 2.1% of applications, down from 2.4%.

Rates on 30-year fixed-rate mortgages averaged 5.28%, up from 5.22% the previous week, while the average on 15-year fixed-rate mortgages increased to 5.15% from 4.98%. The rates on fixed-rate mortgages had been little changed last week, following a dramatic move lower recently

Time Warner Cable Inc. says it is laying off 1,250 people over the next few weeks in the face of slowing growth at the nation's second largest cable operator.

The Treasury Department is bringing back the seven-year note and doubling the number of its 30-year bond auctions as it works to handle a soaring budget deficit projected to top $1 trillion this year.

Treasury said yesterday it will begin auctioning seven-year notes once a month starting this month, and will auction 30-year bonds eight times annually, up from the current four per year. The last time the government needed to auction seven-year notes was in 1993.

The government also said it will auction $67 billion next week in three-year, 10-year, and 30-year Treasury securities, a record amount at a quarterly refunding.

The department on Monday said it will need to borrow $493 billion during the current January-March quarter, a record amount for this period. That borrowing estimate follows actual borrowing of $569 billion in the October-December period, the record high for any quarter.

The Congressional Budget Office is projecting the deficit for the current budget year will hit a record $1.19 trillion. That estimate does not include the cost of President Obama's economic stimulus program, which is now above $900 billion in the measure being considered in the Senate.

Wall Street bond traders expect the total deficit for this year will hit $1.63 trillion. The estimates for this year are far above last year's $454.8 billion imbalance, the largest-ever annual deficit. The deficit for the first three months of this budget year, which began Oct. 1, totaled $485.2 billion, already higher than last year's record.