On The Verge Of The Greatest Inflationary Binge In History

An article written exactly 2 years BEFORE the worst market plunge in history (Jan 2008 until Mar 2009) due to the housing bubble. The article is a bit complicated but you’ll get the bigger picture after finish reading it.

By Bob Chapman

We are n the verge of the greatest inflationary binge in history. Our perceived wealth is the manifestation of one of the greatest misallocation of created assets and as such its existence will have profound ramifications. Our society, world society, has inflated expectations based upon financial leverage and useless credit. Our asset inflation and bubbles have created unsound distortions driven by unsound incentives. Due to this our capitalistic system is in extreme danger. Speculative market dynamics have fueled our economy for many years in spite of our knowledge that previous journeys into this realm have ended in financial tears and at deplorable social cost. All the economic revisionism of today won’t make the past and our human mistakes go away.

Today, like in the late 1920s, there is no sound money and credit. We live in a fiat financial structure underpinned with fiat currencies. This unsound monetary backdrop, like before, has created asset inflation, resource misallocations, speculation that will eventually bring about destabilization, unbridled non-productive debt expansion, wealth redistribution expedited by offshoring and outsourcing, a form of international socialization and an economic system now riddled with holes. This condition was not only created by the Fed and other central banks, governmental fiscal profligacy, but also a new factor the advent of electronic money, so to speak outside our historic system. Unchecked non-productive credit expansion is at the heart of contemporary monetary inflation. Inflation that is officially understated by more than 50% in a system devised to deceive not only the public but professionals as well.

Our bubble is the result of credit inflation based upon the expansion of asset and securities-based finance. A system that is fundamentally unsound. A system based on the value of speculative assets is inherently unstable and leads to booms, which we have recently witnessed, and busts like we saw in the stock market of 2000 and 2001, and we are about to experience in real estate.

We are in the age of Wall Street finance – the engine of global leveraged speculation. The Street is ablely assisted by the Working Group on Financial Markets, also known as the Plunge Protection Team and the Fed, via the repo pool. We are in an era where Wall Street’s excesses are moderated and controlled by corporatists in both government and at the Fed. They are protecting Wall Street’s leverage mechanisms by interceding in all markets. They have kept the US stock market in a narrow range for almost three years to keep it from correcting. A 35% or 50% market correction would destroy their game. They are assisted as well by other central banks. Thus, we have Wall Street and the Fed governing monetary issuance, which gives them free reign to create wealth. This is assisted by a so-called derivative structure. Every time the Fed announces what it is going to do it does so slowly to allow Wall Street to take its profits. They did that with interest rates over the past two years and they have begun that process with the yen carry-trade. It is a system designed to protect the wealth of Wall Street and the very rich to the detriment of the American public. In almost two years Wall Street profits are up 80%. They knew well ahead of time what the plan was. Slowly higher interest rates and massive money and credit expansion simultaneously. The slow elevation of interest rates allow Wall street and its clients to adjust their interest rate arbitrages in financial instruments and in their carry-trade positions. Instead of normalizing, Wall Street ratcheted up its asset inflation mechanism to garner even greater profits. This is why we have not had a tightening in liquidity beyond what the Fed and other central banks have done. At this very moment, despite the condition of our financial system, and the performance of gold and silver in a rigged market, they are still expanding the use of over-issuance and augmenting even more credit inflation. These acts guarantee hyperinflation. They, of course, were aided and abetted by the Fed’s Sir Alan Greenspan in lowering short-term rates providing the wherewithal and incentive for the Street to boost leveraged bond bets and as a result bond yields fell. This allowed the boom to continue and the guaranteed profits to flow to the street. Unfortunately, slowing down the runaway train is not working. In order to keep the system from deflating, M3 and credit had to be increased. To terminate or slow it would guarantee a financial collapse thus, the high-powered game continues and any sane person knows the results are going to be disastrous. Understanding the problem is simple and the solution is, there is no way out. Wall Street understands what they are facing and they’ll play their hand until the bitter end hoping they survive. We are witnessing one of the greatest destabilizing speculative periods of all time. We are going to reap the consequences of unsound money and credit. Your only investment alternative is gold and silver related assets. This is the only mechanism for protecting your wealth.

Trading oil in euros means the dollar monopoly is over and the market place will be flooded with dollars. That means the Fed will have to monetize trillions of dollars and that is immediately inflationary. In euro terms the dollar could easily trade back down to $1.30 to $1.366 before yearend. If that transpires we could see $1.70 by the end of 2007. That means a gold price in the thousands of dollars. If the Fed thinks that by terminating M3 they’ll be able to hide what they are doing, they are sadly mistaken. We know the elitists do not want the Republicans decimated in the next election, but we’ll be able to get the numbers on what they are doing. Hiding M3 is an attempt as well to hide monetization. That is why we implore you to have almost all your assets in gold and silver. The real crisis is just getting underway.

You can expect, under these circumstances, that oil will go to $120 a barrel or higher dependent on whether there is further disruption in the supply. The good news is globalization and free trade will be stone cold dead. After a year or two they’ll be a hyperinflationary blow off and a 1929-type collapse, only worse. You have to be only in gold and silver during the hyperinflation and in gold only when the depression hits. The dollar will no longer be a place of refuge. All this should start to unfold over the next two months.

In 2000, the BIS said ex-China 49.6% of international financial assets were held in dollars and 30.1% in euros. At the end of 2005, the statistics were 37.0% in dollars and 46.8% in euro. That is a massive switch in holdings and the only way you would have found out about it was by reading the BIS’s International Bonds & Notes, not one media outlet carried this very important financial information. That means the strength in the dollar was produced by those fools choosing a higher yield and intervention by the Fed and the Working Group on Financial Markets. The dollar was also assisted by the repatriation of $325 billion by US transnational conglomerates under the Employment Act. The corporations were supposed to create jobs for workers when in fact the money was used to buy back their own shares out of the market, which was expressly forbidden under that law. When repatriating funds they paid 5 1/4% in taxes instead of 33%. A giveaway to fellow elitists. As you can see, all kinds of chicanery has been going on. Giveaways to fellow illuminists and the dollar holders leaving what they believe to be a sinking ship.

This shows you the vindictiveness and mean-spirited attitude that pervades the White House elitists.

Rep. Peter King’s prominent opposition to a proposal to allow a Dubai company takeover of 21 terminal operations at American ports has caused retaliation from our President. King is Chairman of the House Homeland Security Committee. A few days after he first threatened legislation to hold up the port deal, the Pentagon informed him that it could not provide an aircraft for his planned March Congressional delegation to Iraq and elsewhere in the Middle East. He received an e-mail from the Legislative Affairs branch of Secretary Rumsfeld’s office saying they do not have any aircraft to support the trip. Please advise if you will now pursue commercial aircraft.

George and the neocons have to be the biggest bunch of crooks ever to hit Washington. The Pentagon’s newest and fastest-growing intelligence agency, the Counterintelligence Field Activity, has spent more than $1 billion, mostly for outsourced services, since its establishment in late 2002. In the investigation of convicted Congressman Cunningham it was found that Cunningham had earmarked $6.3 million for work to be done to CIFA and the contract went to MZM. The details are terrible, but there will be charges. Cunningham, CIFA and MZM were all in bed together. We find it of interest the neocons choose not to help Cunningham.

Original article here.