Bob Chapman
The International Forecaster
April 22, 2010
Criminality reigns and the games go on. We recently saw the games of fraud explicitly displayed by the antics of Lehman Bros. They kept bad assets off the books by dumping them into what is now known as swap 105’s. What is stunning is the SEC was on the scene and new exactly what was going on; as did the NY Fed, guided by our current Treasury Secretary tax cheat Tim Geithner.
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| Debt continues to hang over nations in staggering amounts. | |
Not only are toxic CDOs, ABS and MBS selling for $0.05 to $0.65 on the dollar, but also it has been discovered that many of these bonds did not contain a full measure of mortgages. Most were shortchanged by 5%. The syndicators, mostly brokerage houses, were not happy making obscene profits; they had to cheat the buyer on the sale. The SEC knew this and did nothing about it – as always in the back pocket of major Wall Street firms.
Debt continues to hang over nations in staggering amounts. Those colossal inconceivable sums have to be financed along with new pyramiding commitments, as welfare states continue to expand. This year some $2 trillion must be found and over the next ten years an average of $300 billion must be found each year, just for the US. That is only the existing debt rollover. This year’s fiscal deficit should be about $1.8 trillion to be added and financed. America will be selling debt of about $3.9 trillion in this year alone. Then you can add another trillion for the rest of the world. The big question is where is all this money going to come from? In the US the Fed will monetize and somehow the rest of the world will have to do something similar. All countries are seeing a fall in tax revenues, and high unemployment, which is going to make their task very difficult, and in some cases impossible. The financing of sovereign debt will be a fearful event over the next few years.
We have seen Greece’s problems over the past few months. There are 18 more countries in a similar fix. Every country wants money at only a shade above cost, which is impossible. Interestingly money on world markets has gone into bonds, yet bonds have fallen over the past year. Very little money has flowed in stocks, yet they have hit new recent highs. That is what happens when markets are manipulated.
Those nations that have been complaining about their financial plight have no one to blame but themselves. They listened to the US and UK for seven years pumping up money and credit and living la Dolce Vida, now the bill has to be paid. Greece has been irresponsible for years under socialist governments. Now they demand that what they call racist Germany, bail them out. When we did the interview in Athens two weeks ago we mentioned that Greek PM Papandreou was a Bilderberg and I was very surprised that it was not cut out of the interview. The PM demanded interest subsidies but in reality broke government have little or no bargaining power. Despite these elements of failure in the end Greece and at least 18 other countries will go bankrupt. It is the sovereign debt and the bond markets. Buyers will forego yields and eventually load up on gold as the only hedge remaining. The bond market is the most important investment in the western world and over the next few years it could well collapse under the weight of sovereign debt. Bonds are not safer than any other investment, because governments destroy the principal via inflation making the yield meaningless and those who chase higher yields, like junk bonds issued by governments, are fools. It’s preservation of capital that is important. Holding bonds becomes especially dangerous when economies falter economically. Liquidity then becomes a problem thus nations then must create ever more liquidity. In so doing they create more inflation. That is what one calls a financial treadmill. Trillions are needed to service debt that grows exponentially every minute. This is the core and nexus of today’s crisis.
Full article HERE
