AS THE ECONOMY STUMBLES the American standard of living recedes. Forty-four million people are using food stamps and in one year that figure will be 60 million. Washington and Wall Street say “what, me worry?” Of course not; they are the “masters of the universe.”

We are 24 months into an inflationary depression and it still goes undiscovered. Who cares that the issuance of food stamps is up 80%, as long as the bonuses on Wall Street and in banking continue to flow and bureaucrats get higher and higher salaries and benefits? The high cost of health insurance, no longer affordable to most have increased and Medicaid users are up 17%, as the program costs increased 36%. Those on welfare rose 18%, as costs rose 24%. It is now evident to many that the choice of early retirement in the late 1990s at 52 and 59 years old was a big mistake. Many must now work into their 70s, or starve. Many retirees are forced to reenter the workforce. Recently there were 2,000 job openings and 75,000 people applied. How is that for recovery? The birth/death ratio is bogus and real unemployment is 22%. The economy needs 2 million new jobs a year and that is impossible. Good paying jobs are still being offshored and outsourced. How about the millions without jobs now for years? While all this transpires the Fed bails out Wall Street, banking and government and leaves crumbs for the dispossessed.

It always gets us when these acceptable writers use soft or euphuistic phrases to describe creeping national state socialism. The big picture is dreadful, but government, Wall Street and the media won’t tell you that. Truth has nothing to do with business. They all spin one lie after another, just as you have recently seen with a certificate of live birth and the death of Mr. bin Laden. It reminds one of the old song, “Anything Goes.”

Those running Washington from behind the scenes know America can never pay off and liquidate its debt. That is why there is little effort to do so. The real idea is to destroy the system. It reminds one of Argentina in 1999, before they defaulted on 2/3’s of their debt only in a much bigger way. The dollar, because it is the world reserve currency, and that nations hold about 60% of foreign reserves in US dollars affects the entire world. America’s Wall Street, banking and government has had a 66-year party and everyone gets to pay for it. The next step, rather than austerity, will be confiscation of all, or part, of pensions, that $12 trillion pool of government and individual retirement funds. Needless to say, such irresponsible actions only delay the inevitable monetary collapse.

Tagging not far beyond is England and Europe, both of which have used the same template for so many years. In the US and all of these nations we see more than 50% of the population functionally illiterate and this same group country to country essentially pays little or not taxes, and receive benefits from government. That does not include the illegal alien population in each country that pays virtually no taxes. Spending far beyond tax receipts can only mean eventually that the deficits will destroy the system. That means a lower standard of living, which has already manifested itself in all three regions. Such profligacy has in the US, UK and Europe caused the Fed, the Bank of England the European Central Banks to create money and credit out of thin air monetizing buying and holding sovereign debt as well as debt clogging the balance sheets of the financial sector. In Washington the administration is considering an oil tax increase as the public pays more than $4.00 a gallon and in Germany it’s $9.00 a gallon. Expect more of this non-income tax taxation. Each tax increase and each loss in services brings less purchasing power, as inflation rages.

All these entities each day find it harder and harder to sell bonds to support their debt load, thus, revenues have to be increased. In the US the top 10% of taxpayers will end up paying 75% of total income taxes. This has already started an exodus of high-income earners to leave the country over the past 15 years, and the numbers are increasing exponentially. That in turn throws an added burden on middle class taxpayers.

At the root of the problems of all these nations is Keynesian economics, which has become the basis for corporatist fascism. The growth of money and credit worldwide has been exponential and continues apace as nations refuse to cut spending and central banks continue to be fonts of money and credit for their financial sectors and for governments. The financial system worldwide is awash in liquidity, which is accompanied by low or near zero interest rates. If those conditions were to be higher interest rates and less monetization the world system would collapse, although governments are manipulating markets downward such as gold, silver and commodities. What they are accomplishing is very little versus the intermediate to long run. That is why in the long run gold, silver and commodities have to move higher, as investors flee the general stock and bond markets, that don’t reflect the results of inflation. That is why inflation will worsen as central banks continue to spew out more money and credit, which is now euphemistically called quantitative easing. First we saw inflation rise in the developing world for a number of reasons, which has since moderated to a great extent. Inflation is growing at a realistic 4% to 6% overall. The problem lies in the developed world where real inflation runs from 8% to 20%. Nations such as the US, UK, China, India, Brazil, etc. are not only suffering high inflation, but they are exporting it as well. Not enough to keep inflation at bay in their own countries, but enough to make financial conditions in victimized countries difficult. As an example, take America’s neighbors Canada and Mexico; instead of having a natural 3.5% inflation for 2011, their inflation at year-end will be 4% to 4.5%.

As we predicted a year ago, QE3 will become reality, although it will be called something else. Not only in the US, but also in the UK, Europe and other countries, as well. If the issuance of money and credit were to stop and interest rates were to rise the world would head into deflationary depression. That is why the music has to continue. Sooner or later it will stop and when it does the bottom will fall out of the world economy and financial system.

The Fed continues to create money and credit and prices continue to rise and will do so for at least 1-1/2 more years. If we get the equivalent of QE3 that will be extended 1 to 1-1/2 more years. Dependent on how big a QE3 could be two to three years ahead, inflation could range from 25% to 55%. As this affects the US economy the banking system will remain weak and near insolvency. As inflation rises in a moderate fashion in the developing world the first world will see inflation rise higher quickly.

We currently see yields on Treasuries falling again from 3.60% on the 10-year note to 3.22%, as the Fed manipulates lower yields into position. That would be in anticipation of higher real interest rates caused in reaction to QE3. This is all rear guard action to try to create employment from a sector that remains under intense pressure. Any job creation is being offset by the high layoff rates of municipal and state workers. These measures by the Fed will also continue downward pressure on the dollar and upward pressure on gold and silver and commodities. Any tightening by the government or austerity measures to reduce the fiscal deficit would be disastrous. That is if you want to keep the game going at today’s level. It is a different story if you really want to solve the problem.

As we switch to the Middle East we see serious trouble coming. In fact it probably is the groundwork for World War III, the event needed from an historical prospective to begin a new world war to cover up the economic and financial collapse now taking place. Why else would the US and UK stir up rebellion in Syria, the home of a Russian naval base and in Libya where the Chinese just recently had to remove 29,000 workers due to a US and UK created rebellion. Libya supplies relatively inexpensive quality oil to China in large quantities. As these adventures unfold it becomes more obvious that a new war is being set in motion. As a reaction we see China saying they want to reduce their dollar forex position by 2/3’s or by $2 trillion. The US won’t let that stop them, so China is going to be a large dollar seller and part of those funds will go in gold and silver. That means the dollar will definitely fall lower both in terms of other currencies, but more importantly versus gold and silver. Dollar bulls are very hard to find. Those negative regarding the dollar we doubt have a clue that WWIII is underway. What has come to the attention of those negative on the dollar is that the US is developing into a Nazi police state. The US government wants to know exactly where all the assets of every American are and at the same time set compliance rules on foreign banks and institutions, which have US persons as clients legally. For Americans, foreign countries have to report any real estate owned by Americans in their country and on January 1, 2013, annually these nations banks have to send 1/3rd of all bank assets to the US IRS ostensibly to pay taxes, which in most instances have already been paid. It is a grab of the assets of Americans who dare to live in another country. As a result the US government gets little or no respect outside the US. The US is a pariah and the laughing stock of the rest of the civilized world. What people other than Americans could believe the fantasies of the obviously phony “live birth certificate” and the death of a man that had already been dead for almost 10 years. The foreign opinion is that the sheeple deserve it.

As an adjunct to this the US government is going to keep US troops in Iraq beyond the end of the year. The Iraqis have to approve this action, so we’ll have to see what happens. It is obvious the US has no intention of permanently withdrawing their troops. The excuse is based on the Shiite uprising in Bahrain and the massive Saudi intervention, along with events in Yemen where the dictator has agreed to leave. Iraqis believe that accommodation with Iran is the only way to coexist. They see iran as the only real power in the region. They also recognize Iran as an emerging regional power. Thus, we see Iran balking at the US leaving 20,000 troops in Iraq.

As Iran vies for influence in Iraq so does Saudi Arabia. Both are funneling money into Iraq. Iran is the target of the US, Israel and Saudi Arabia, but it has an edge at the moment. That is because of a multiplicity of problems in Saudi Arabia itself and on its borders with Bahrain and Yemen. Thus, Saudi is in a difficult situation in trying to extend its influence into Iraq. The only real weapon the Saudis’ have is money and lots of it. They cannot really pretend to be anything but a minor defensive military power. Thus, their reach is limited. As of late the US has only been of limited assistance. Naval and air solutions lack the ability to threaten Iran’s center of gravity, its large ground force. The intrusions already made have been dangerous and the US lacks ground troop ability. One thing learned over the centuries of warfare is that if you conquer you have to occupy. Each place you occupy involves leaving troops that are lost to the vanguard. The US simply does not have the troops to occupy or to engage massive Iranian forces. In addition a war with Iran that probably would become WWIII, would cost trillions that the US doesn’t have. As opposed to the past America’s allies outside the region don’t have the stomach for war, or the resources and appetite for involvement. Their militaries are skeletons of what they had in the past.

We recently saw aggressive action long planned for in the Middle East and North Africa by the US. They may be able to create turmoil and a civil war in Libya and replace one group of American dictators with another, but no substantial change will take place. What has taken place is a temporary pacification process to leave the road to Iran unfettered. The supposed execution of Osama bin Laden has definitely made matters worse in the region just to make Mr. Obama seem like he has accomplished something. These are some of the worst foreign policy moves we could ever imagine.

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We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster

by Bob Chapman
Publisher of The International Forecaster.

THE ADMINISTRATION and those who control it, the House and Senate, want us to believe that debt can be paid out of revenues now and forever. As inflation and perhaps hyperinflation set in we could easily see 10% interest rates. If that happened debt service would consume more than 40% of tax revenues. The projection that tax receipts over the next four years would grow by 1/3rd is ludicrous. That is more than 12% a year. Further increased taxation would send more companies and jobs offshore. The bottom line is that further will impede GDP growth and further stagnate the economy. Do not forget 70% of GDP is via consumption. There is no conceivable way with free trade, globalization, offshoring and outsourcing preceding a pace and with the manufacturing base in a shambles, that production and exports can pull the economy from its doldrums. How can revenues be increased under such circumstances? At the same time consumers are reducing debt and saving about 4% of income. This kind of environment is not inductive for consumption to rise from 70% of GDP to 74%, which is needed to bring about those revenues.

That brings us to QE2, and $862 billion in spending. QE1 and $868 billion did not cause a lasting recovery, so we do not believe Qe2 and pork spending will either. Last time we had five quarters of 3% to 3-1/4% subsidized growth. We call it the law of diminishing returns. We believe that by the end of September when the fiscal year ends that the Fed will again have spent $1.7 trillion, as they did in QE1, money and credit that they created out of thin air. Presently the expansion in spending from QE1 and stimulus 1 are starting to be monetized within the system in the form of inflation above and beyond that which is needed to neutralize the undertow of asset deflation. Presently Chairman of the Fed Bernanke tells us there is no inflation, and government tells us it is 1-1/2%, when in reality it is 6-3/4%. We believe by the end of the year we will be looking at 14%.

In QE1 the funding went to the financial sector, which was on the verge of bankruptcy. That was followed by record bonuses for the criminal syndicate known as Wall Street. QE2 is being used to bail out the US government by purchasing US Treasury and Agency securities again with funds created out of thin air. In the first process some $13.8 trillion was used to assist financial institutions in both the US and Europe. The Fed wouldn’t tell us what they were up to so the people had to get a court order to force them to reveal where all the funds had gone and how much had been spent.

We have spent ten years in which growth has been created by inflation. As far as we can see in the future this will continue to be the case, and as a result the US dollar will continue to deteriorate versus other major currencies and in particular versus gold and silver. Even though official Fed interest rates are close to zero real rates are advancing. That is in spite of Fed support of the long end of the market. The US 10-year note has recently traveled from 2.20% to 3.65%. It is probably headed to 4% to 4-1/4% by the end of the year. This is a reflection of investors demanding higher yields to protect against further dollar deterioration. These higher rates mean that US debt service will grow in the future causing debt service to become more onerous. As a result the Fed will have to create more money and credit and monetize it by buying ever more Treasuries and create ever more inflation. That is a vicious circle. In the meantime taxes will be raised, which will cut back on economic activity, which will cut revenues eventually and at the same time increase already high unemployment. The Fed is surely headed for a crackup of enormous proportions.

In the House and Senate and in the White House there is no talk of a balanced budget and budget cuts will be at a minimum. The cycle continues of never ending debt, as taxes move relentlessly higher. That includes 44 million on food stamps that could grow to 88 million – 15.7% below the poverty line that could easily double, unemployment at 22.6%, which could double. At the peak in 1933 unemployment, U6, was 37.5%. Yes, this time it will be worse. Workers are now receiving 42% of their income from non-government income. That could fall to 21%. The 18% receiving who get their income could rise to 36%. Calling U3 at 9% is an insult to any thinking American. There is a way to cut costs under the Medical Reform Act; all those with chronic diseases will be allowed to die. Society can no longer afford useless eaters.

Inflation officially is 1.5%. Real inflation is 6-3/4%. It will be 14% by the end of 2011 and higher in 2012, as QE1 and QE2 flow through the system. The creation of inflation does not create jobs. It makes the rich richer. Government is presently trying to redefine a balanced budget by eliminating interest payments, which shows you the arrogance of these criminals. The President and his advisors know that interest payments will eventually become the largest debt budget item.

The President tells us he will increase spending by $20 billion, which will accompany taxes. We certainly do not call this tax reform, but an open door to tax increases and major spending policies. The CBO, the Congressional Budget Office tells us the bipartisan tax cut legislation, or pork package of $862 billion in stimulus, will drive the government’s deficit to a record $1.5 trillion in 2011.

Government is going to continue to borrow 40 cents of every dollar it spends. Soon the cash deficit will reach $14.3 trillion, which is the current limit by law. We expect the limit to be raised to about $17 billion and the best we can hope for in spending cuts will be $50 billion. If you subtract the President’s spending increases that is really a $30 billion cut. Who knows at this stage whether these cuts will really become reality. It just shows you the Republicans haven’t changed much. The cuts are really just cosmetic. In addition, the CBO believes GDP growth in 2011 will be 3.1%. We believe it will be 2% to 2-1/4%. If the CBO is incorrect it will deeply affect economic statistics and outcome. If you add in a 2% payroll tax cut this year and extended unemployment benefits you will get much different results. The payroll cut alone will cost another $400 billion.

The CBO also says Social Security will pay out $45 billion more in benefits this year than revenues, because since June 1935 the fund has been looted by channeling revenues through the general fund, which were immediately spent. After the next election in 2012 you can expect a reduction in future benefits and an increase in retirement age further reducing future benefits. We expect a 15-cent a gallon increase in gas taxes and a further scaling back in tax breaks, including the child tax credit. They will also try to eliminate the mortgage interest reduction, which would further devastate the residential real estate industry. The House will attempt to end the deduction claimed by employers who provide health insurance in exchange for rate cuts for corporations. The 500 major corporations are presently sitting on $1.9 trillion in cash, domestically and $1.9 trillion in offshore accounts — a benefit derived from free trade and globalization. There is already in the works, via secret White House talks on December 15th, a plan to bring those funds back into the US at 5-1/4% taxation rather than 35% costing taxpayers $650 billion in lost tax revenue. Those funds will be used to buy company shares boosting them, allowing officers to cash in their stock options and make billions of dollars, prop up the stock market and assist by buying Treasury and Agency bonds. This is what corporatist fascist governments are all about.

From 2010 onward two million addition citizens are expected to sign up for Social Security, Medicare and Medicaid annually. The COLA formula has been falsified for 30 years by bogus CPI figures. As bad as that has been and is, it will be much worse when that link is broken and only a flat benefit will be paid as inflation rages. If you couple this with the Medical reform death panels there will be very few Americans roaming around America. They’ll either have been eliminated as useless eaters or starved to death. Believe us this is no exaggeration.

In 2011 the US dollar will continue to deteriorate. It will test 71.18 on the USDX, which are 6 major currencies versus the dollar. The dollar will also fall versus gold and silver as will other currencies. Over the past ten years nine major currencies have fallen an average annually versus gold by 15-1/4% and versus silver 20-2/3%. Those are the real benchmarks of dollar deterioration. Versus the USDX 71.18 should be broken in 2011 and eventually reach 40 to 50 over the next few years as gold and silver rise. Do not forget based on 1980 methods of value, when gold was $850 an ounce officially gold should be selling for $2,400 an ounce. If you use unadjusted figures that price would be $7,700 today. It just shows you the extent of gold suppression by the US government, the Fed and other central banks over those years. If you were depending on Social Security for retirement or your pension, 401K or IRA, forget it. Your only guaranteed protection will come from your gold and silver assets and do not forget that.

The situation in the euro zone is well known to most readers. Greece has borrowed $132 billion or is in the process of doing so, and the EU, the ECB and the IMF are committed to $1 trillion in bailout money for the six countries in trouble. Several of these countries have been downgraded by rating agencies. This situation is problematic, but the US situation is fundamentally worse. In a way the European situation although not good has been used as a cover for US systemic problems. That is because American professionals do not want to hear about it and the American public is still wondering around in the darkness.  They still for the most part do not know what is being done to them, nor generally do they care. It is all Super Bowl and beer while it lasts. The US has been in a mode of printing money instead of producing goods and services for years. Dollars are the world’s reserve currency, which has given the dollar an unnatural extended life. In addition to that foreign countries have continually printed their own currency, bought dollars and bought US Treasuries in order to manipulate and cheapen their currencies. In this process the US has been able to export inflation. In time this unusual situation will end and the inflation will be turned inward in the US becoming very disruptive. This means at the dollar’s present pace it soon won’t be the world’s reserve currency. As currencies such as the dollar fall against other currencies the cost of imported goods will rise and US inflation will get another boost.

America needs to recapture its manufacturing base, which has been the basis of its success for more than 250 years. The way to do that is impose a 25% plus tariff on all goods and services. This is a matter of survival, not politics. The US carried the world for 65 years and it is time for these complainers to pay a price for their success and standard of living. The US will also profit from a much higher savings rates, 10% or more would be helpful. It is currently 4%, down from 7% prior to November.

There is no question that the dollar’s reserve status has and is being abused. The prime reasons for that status was it was the only nation really left standing at the end of WWII, and the dollar was backed by gold. That has not been the case since August 15,1971. If the US is to maintain its dollar status it has to devalue and revalue versus other currencies and go into multilateral default. Then gold backing can again be put behind the dollar. If they do not have the gold they will have to buy or borrow it. If that is not done another currency or group of currencies will have to be used.

Since WWII all other nations have deliberately devalued their currencies. The US didn’t mind because it was by far the strongest nation in the world. Whenever the world had a recession the US bailed it out by creating more money and credit. That made everyone happy and the world rolled along. This is no longer the case. Since the 1980s, at the behest of WTO, NAFTA and CAFTA, the trade tariffs have almost all been removed. This free trade, globalization, offshoring and outsourcing by transnational conglomerates has destroyed America’s internal manufacturing infrastructure with the loss of 42,400 company and 8.5 million good paying jobs. As long as this is allowed to continue America cannot compete and will continue to slip toward a lower status among nations. The only way to stop this headlong rush into oblivion is to leave WTO, NAFTA and CAFTA and reinstitute tariffs including penalties on those countries that insist on continuing to depreciate their currencies. If this is not accomplished with the unpayable debt the country is carrying, it is doomed.

Yes, tariffs mean higher prices for imported goods and more inflation. Our trade deficit would fall and the dollar would stabilize. All those American corporations that moved to foreign countries to take advantage of cheap labor would no longer be able to capitalize on cheap labor and perhaps keeping their profits offshore in secret tax havens when they pay no US taxes. Things have to change and change quickly, or America’s competitive position will be permanently destroyed. Other nations will be able to buy more domestic goods with their stronger currency, raise their standard of living and develop their own domestic economies.

Those whose aim is to bring about world government know that if a country does not have a sound industrial base it can never be successful as a nation. What is being done to the US and Europe in the name of free trade is to force the people of those nations with a collapsing economic and financial structure to accept World Government. This is what this deliberate destruction is all about. In order to rebuild the manufacturing base the US has to erect tariff barriers on goods and services and savings have to be increased. The situation with savings is the same as it was in 1959, 43% of Americans have less than $10,000 saved for retirement. America needs a 10% savings rate if they ever hope to recover. Accumulation of savings has been difficult since 2000 due to declining interest rates. Stocks have risen only 9%, bonds 67%, but gold has risen five-fold and silver six-fold. We have recommended gold and silver coins and shares over that 11-year period so subscribers have been able to save and profit. The other 99% of professionals have been losers, not to mention the losses to inflation. The gold and silver bull market will be the greatest bull market of all-time. There is no safer place to be.

Listen to American Mercury contributor Bob Chapman on GONOB Radio (Though the host has a few flights of fancy, he’s learning, and it’s great to hear Bob’s insights, from being trained in intelligence work a half century ago to becoming the “worst nightmare” of our illegitimate rulers. — Ed.)

*  *  *

We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster

WHEN YOU STOP and think about it, the Fed’s main instrument of monetary policy, the manipulation of interest rates, has been lost to it. That is two years with the same rate. What has become very obvious is that an official rise in rates would create all kinds of havoc. The same is true for Europe. This past week the ECB held rates steady as well. South Korea raised their rates. As the TV camera panned downtown Seoul we observed a large sign that said “buy Korean” — so much for free trade.

2011 will witness the US financial structure and economy under severe pressure again, especially in the second half of the year. The US is forced with major refinancing and the issuance of new debt in the trillions, the municipal problems will come to fore after July 1st, not that they haven’t already with an illiquid market and Europe will be embroiled in keeping six of its EU-euro zone members from insolvency. It is going to be some year. Germany is comical. On one day the public says no more bailouts beyond the $1 trillion already committed. The next day Mrs. Merkel says Germany will save the euro. The euro can only be saved with a commitment of $3 to $5 trillion. That means an additional major financial commitment. We do not believe the solvent nations of Germany, France, Holland and Austria will commit for that. If they do they will go bankrupt.

In coming up with trillions of dollars to purchase Treasuries and agency bonds they’ll monetize and the US will have much higher inflation.

The states and municipalities are essentially on their own. It is now very difficult to sell bonds, if possible at all. They’ll be no more Build America bonds and the federal government refuses to make additional loans, as Meredith Whitney has said more than 100 municipalities could stop paying interest on their bonds and approach insolvency.

These three events alone could bring down the financial structure of the Western world and perhaps the entire world. It could lead to no sovereign bond bids, as it already has for municipals. The deliberate effort to interconnect nations, regions and states could expedite such failure. It is not any longer possible to deal with problems in isolation. One thing affects another.

The denigration of the American middle class began three years ago and it is still just getting underway and the public hasn’t a clue as to what is happening to them and what is going to happen to them. An indication of that is this past Christmas spending. At the upper end sales rose 9% and at the lower end only 1.5%. There is no question that austerity is starting to take hold in America’s lower and middle class. What we see over the horizon is going to take its toll on U.S. GDP. Even with $2.5 trillion in net spending GDP growth in 2011 will be 2% to 2-1/4% down from 3% to 3-1/4% yoy. In addition what the government finally has to admit is that CPI and unemployment figures are totally bogus and GDP figures are substantially lower than stated. We can promise you in time this will all come out in the wash. We can also throw in that debt to GDP is not 80%, but 115% on a par with other failing nations. The financial and economic profile of the US has been altered by free trade, globalization, offshoring and outsourcing and without tariffs on goods and services prosperity can never return to what was once the greatest nation on earth. Listen Americans, if you want to live in a third world nation that is fine. If you don’t, force your representatives and senators to pass such legislation. If you are not successful and when all is said and done revolution will be your only choice, unless you like living on your knees.

If you refer to the last issue and the three problems facing Europe and the US next year you will also be facing an increase in global yields and much higher inflation. That is with official rates at zero and no exit strategy and perhaps QE3, as we predicted last May. Needless to say, these events are all going to be painful and destabilizing. These financial events are bound to have their social costs and that could cause severe changes in stock market performance. 2011 is going to be a very nasty year.

The handwriting is on the wall, but in Washington neither party is listening and they are accumulating debt by not altering their borrowing and spending habits.

Not only that, we have our states acting like Greece and Ireland, either of which could break out in full scale revolution at any time. The papering over of problems and the issuance of Build America bonds are history. Wait until the derivative bomb explodes. When will those who run Wall Street have another flash crash? Who will they blame it on this time? Who cares — the SEC doesn’t care and neither does the CFTC. At the same time we have an advancing credit bubble. QE3 could well cause hyperinflation, and QE3 will come. What a terrible web they weave.

Problems are not confined to the US. Ireland, England and Greece are on the hot spot. The debt Ireland has guaranteed is colossal. It is 30% of GDP. It bails out not only Irish banks, but British, French and German banks as well. What a sellout. It is impossible to take 40% of tax revenues to pay down outrageous debt at 6% interest. Needless to say this is unsustainable and the result will show up in spring elections. We expect the new government to renege on the deal. This is worse than WWI German reparations. They must believe the Irish are stupid. Do not forget it was the Irish that saved civilization and all is not lost until the last nail is hammered into the coffin. Europe has no contingency plan and the Irish exiting the euro zone and perhaps the EU could be the start of an exodus. Very simply the arrangement, a Bilderberg sellout, will be history. The $100 billion owed to US banks and $200 billion owed to the Royal family will not be repaid. That means the CIA and MI6 will again infiltrate Ireland and try to turn it upside down. As we said, if Ireland refuses to be destroyed then all the other nations in trouble will do the same thing. It will all come just be patient.

The subprime ALT-A crisis is still with us only bigger than ever. Our Fed Chairman tells us it was an isolated incident. We wonder what he has been smoking, or is he just a compulsive liar. It is the policy of such people to leave the public to their own devices and take care of the financial sector.

We predicted months ago that the bond market was a bubble, but we didn’t know when it would begin to be over. The beginning has begun. We have just seen the biggest bond fund outflow in almost 30 years. In December that was accompanied by a massive outflow from stock funds. For stocks that was the 33rd week in a row. This all was accompanied by an almost $10 billion outflow in municipal bonds. Bond mutual funds saw the biggest outflow in two years. You ask, with all the funds flowing out of bond and stock funds, how do these sectors hold up? The answer is your friendly government does not want you to know what they are up too. Even at PIMCO bond investors pulled out $1.9 billion. As more and more scandals break, on insider trading and market manipulation by government, less and less investors want to participate in markets. There is certainly nothing free or fair about them. Bonds are under pressure because of profligate Fed spending known as QE2 and the pledge to spend $900 billion. It is known as monetization and it is very inflationary. When the Fed continues to buy 75% of US Treasuries, government has a problem.

We received a taste of the future in the recent passage of the $862 billion pork tax bill, or stimulus 2. Anything goes to keep the system from collapsing from both parties. The new Republican majority in the House has said no increased spending without compensating cuts in other budget items. We do not think the House will cut military spending of $700 billion. If any cuts come they will probably come from Medicare and Social Security. The retired and baby boomers won’t like that one bit. Perhaps in two years they will see the wisdom of removing incumbents from office.

As municipalities approach failure and as the Fed keeps a broken system alive, Europe does everything possible to keep the euro zone and the EU from collapsing. Due to ECB and Chinese intervention, Portugal, Spain and Greece are hanging on, but barely. As the ECB tries to gain time Mr. Trichet attempts to garner an even bigger rescue package, one we believe could bankrupt solvent members of the euro zone, if not the EU. While this transpires just Portugal, Belgium, Spain and Italy have to raise $800 billion this year, the bulk of it in the first two quarters and the lions share in the first quarter. Greece and Ireland kick the total up to $1 trillion. In addition, Belgium has political problems and has had them for some time. It seems citizens want to split the country in two, which is only natural. The two groups have little in common. We know we have spent plenty of time there. As we said before the year is out these three problems will converge and the result will be extremely disruptive.

We now have a Federal Reserve that controls a financial monopoly over the American people, as a result of recent legislation. In this process more power is also being given to the IMF, the BIS and the WTO. Power is being taken away from sovereign countries and put into the hands of people who want world government. If you do not think that is real, recall the comments of former US Secretary of the Treasury, Mr. Paulson. If the financial sector wasn’t rescued Americans would wake up to Martial law. In other words, you either go along with our program or we will destroy you and the system.

Then, of course, there is the ongoing threat of terrorism, which is married to all of the above. Government is currently preparing to protect us. There is cyber security in the works to make sure terrorists do not get us or our wealth and threat is why they must know where everyone’s assets are. They have to check every wire transfer to make sure you are not a terrorist or a money launderer to protect you. Now everything everyone does is subject to scrutiny. Americans are to be treated like common criminals by their government. As a result, America’s land of individual freedom is dead, unless there are major government changes.

Every event is staged with several special purposes. The main goal is to bring out dissidents and to further advance world government.

In all likelihood capitalism in its present form won’t survive. Credit and debt are in such an advanced stage that even zero interest rates cannot turn the economy around. Worse yet, it gets more difficult to sell debt. The underlying problem is just too much debt to overcome. The departure on August 15, 1971 from the gold standard sealed the fate of the dollar. It allowed endless creation of money and credit that became overwhelming debt. Due to this profligacy in dollar issuance, and similar experience in all other currencies, the dollar fell close to 30% versus the price of gold this past year. This is gold replacing the dollar and other currencies, as the world reserve currency. This is 11 straight years of gain in a classic flight to quality. The elitists know their game to suppress gold and silver has been lost. What they now must do is have a meeting of all nations, revalue and devalue currencies, have a multilateral default and re-back the dollar with gold or have an international trading index of currencies that will have to be gold backed. That means currencies will be backed by gold at a much higher gold price, perhaps $6,000 an ounce or higher.

Over the past three years investors in general have reduced risk and consumers have avoided accumulating more debt. These responses to inflationary depression are normal, but they are opposite, what the Fed needs for a recovery. The upper middle class and the rich are expending buying, but the poor and middle class are not. The miracle of credit and debt is coming to an end, and the parasites are looting the system for a final time. It isn’t going to do them much good because we know what they are up to and who they are. This time there will be legal retribution, they can count on that. Forty years of looting will soon be over.

In the late 1990s the dotcom boom in the stock market could have easily been taken under control by raising margin requirements from 50% to 60%, but the essence of what the Fed and Sir Alan Greenspan were doing was to force the markets higher to bring in more mega-profits for Wall Street and banking.

The same thing happened during the real estate boom. Lenders, the Fed and regulators deliberately created a bubble. Fraud was rampant as rating agencies colluded with bond syndicators of mortgages. Anyone could buy a house even if they couldn’t qualify. Bonds were rated Triple-A when they in fact were Triple-B, the difference between a 10 and a 4. These criminal acts brought the housing boom an additional lease on life. No criminal or civil actions were ever brought against these fraudsters which tells us the Fed had to have had sub-rosa deals with the buyers of these toxic bonds, especially in Europe, which absorbed 60% of the toxic waste. This is probably why the Fed had to be forced to reveal how much money had been lent to European lenders and what the collateralization for the loans were. Trillions of dollars were used to bail out the buyers of toxic MBS-CDO bonds. We believe this was the deal from the very beginning. If you correlate the funding by the Fed you will find most of it went to banks that absorbed the MBS.

The tip-off is simply that no buyer ever initiated even civil action. Thus, you can see what the game was all about. Needless to say, no one will ever go to jail for the fraud and the American taxpayer will pay for the losses.

In the early 1960s we fortunately were able to see what lie ahead for the dollar and the monetary world. In 1964 we saw inflation start to spin out of control. That was the year the US removed silver from its coins and began the trek to abandonment of the dollar on August 15, 1971 and the inflationary blow off of 1980. The actions that began in the early 1960s led us to where we are today. The system has been looted. Americans and Europeans are being traumatized by a failing system, which has been engineered to bring about world government and the total enslavement of mankind. Over all those years, more than 50 years we have advocated that the system was indeed meant to collapse and that the only safe place to be, which is for financial salvation, was to be in gold and silver. It has certainly turned out that way.

This is why it is so important for writers, economists and analysts to understand why we have the problems, why they were caused and who caused them. All the answers lie in economic, financial, social and political history. What is being done has been tried many times in the past, but always unsuccessfully. You would think these planners would learn, but they haven’t. The reach for ultimate power is simply too attractive and enticing. Thus, for over 50 years gold has disappeared from government hoards, only to end up in private hands that understand that the ultimate money is gold. Gold is power and he who has the gold makes the rules. If you cannot grasp this small piece of history you will never understand the course we are on and how we got there. Ignorant of history, overall, Americans and Europeans probably as individuals probably only hold less than 5% of all gold in existence. If we include peoples of other nations and elitists, that figure catapults to probably 60% to 70%. As you can see people in the Western world do not get it and if that situation does not change they’ll lose all of their wealth and purchasing power. No matter what governments and those who control them do the fact remains that gold and at times silver, are the ultimate money. People are going to learn this lesson soon and you do not want to be one of them.

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We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster