The International Forecaster, Bob Chapman, discusses The Fed’s options for 2010 and what effect their decisions will have on the economy in Potential for Fed To Hyperinflate:
The following information may be the most important we have ever published. One of our Intel sources, highly placed in banking circles, tells us that on 1/1/10 all banks that have received TARP funds have been informed by the Federal Reserve that they must further restrict any commercial lending. Loans have to be 75% collateralized, 50% of which has to be in cash, which is a compensating balance.
The Fed has to do one of two things: They either have to pull $1.5 trillion out of the system by June, which would collapse the economy, or face hyperinflation. This is why the Fed has instructed banks to inform them when and how much of the TARP funds they can return. At best they can expect $300 to $400 billion plus the $200 billion the Fed already has in hand.
We believe the Fed will opt for letting the system run into hyperinflation. All signs tell us they cannot risk allowing the undertow of deflation to take over the economy. The system cannot stand such a withdrawal of funds. They also must depend on assistance from Congress in supplying a second stimulus plan. That would probably be $400 to $800 billion. A lack of such funding would send the economy and the stock market into a tailspin. Even with such funding the economy cannot expect any growth to speak of and at best a sideways movement for perhaps a year.
Mr. Chapman gives us a peek into the perceived complexity of the environment in which the Fed is operating. If they stop the printing, we risk a serious deflationary collapse as credit becomes even more restricted than it is now. If they continue printing, the ultimate result will be a hyperinflationary meltdown of the US Dollar.
Either way you slice it, our view is that the system is in serious trouble, and a collapse of some type (deflationary or inflationary) seems inevitable. While we may be seeing and hearing oft repeated signs of the end of recession, Bob Chapman says he is “skeptical of the strength and duration of such a recovery”
Some potential collapse effects and recommendations from Bob Chapman:
—“…get your cash values out of life insurance policies and annuities. They are invested 80% in stocks and 20% in bonds.”
—“Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year.”
—“The Fed also expects a meltdown in the bond market, especially in municipals.”
—“Public services will be cut drastically leading to increased crime and social problems, not to mention the psychological trauma that our country will experience.”
—“We do not know as yet what the new system will be like, but the con game is over and most of the world’s inhabitants are broke. The debt that is owed simply cannot be repaid. Japan, the US, the UK and Europe will be the first to go followed by most of the rest of the world. ”
Sorry to burst your bubble.
If the SHTFers are right, then this recession is (was?) was simply a cyclical wave within a larger, much broader, Greater Depression wave. As such, a new downward move is not far away.
This will not happen overnight, and for many, once they realize what has happened, it’ll be too late.
Bob Chapman writes:
“The situation is still dire and the solution is temporary and unworkable and Washington and New York are well aware of this. The game will play out over the next few years. In the meantime the dollar will move lower and inflation, gold and silver higher.”
ARE YOU READY?
Here’s how we look at worst-case scenario SHTF Planning:
The SHTF Scenario: If the S really does hit the F, then having preps like food, home defense products, sustainable living knowledge and tools, gold/silver, clothing and other reserves will certainly come in handy. Yes, you may need to stretch your budget a bit (or a lot) and spend an obscene amount of time learning a variety of ‘survival skills’, but consider it an investment for you and your family’s personal well being.
The Recovery Scenario: If, however, the doom and gloomers are wrong, then so be it. Some of your preps will be for naught. The financial and economic systems around the world will recover, and it will be business as usual. The great thing about this scenario, is that you will likely be able to find a well paying job, or if you run a business, your sales will increase back to pre-recession levels. So, you’ll make all that money you spent on preps back, and more.
For SHTF Doom and Gloomers, it’s a win-win situation!
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this is the economic scenario that schiff, celente,willie and paul craig roberts have been talking about. it’s ( in my opinion) inevitable.
I read Bob’s article a few days ago. I was a bit surprised about his recommendation to cash out your life insurance/annuities since they hold 80% cash/20% bonds. The reason for my question is if we’re facing hyperinflation (yeah I know, just 1 of the many possible outcomes), then stocks will soar, nominally speaking. Bonds may tank, but that’s only 20% of the portfolio. What am I missing here? I’d really like to know since I, like most Americans, have at least one insurance policy and would really like to cash it out if it’s going to be worthless.
As far as the SHTF scenario, I am ready. I have stretched my budge a LOT to prepare. Either way I am covered, but having the food/water completely in my hands is worth a little extra sleep at night. What is hard is staying afloat in the current credit driven system we have when all our expenses keep going up and there’s no extra money coming in. Guess I’m stuck between 2 worlds at the moment.
As far as this being a cyclical wave inside a much larger Great Depression wave, that’s exactly the wave theory of Harry Dent. I’ve been reading his material lately. He says we’re due for a very large depression end of 2009/beginning of 2010 due to the convergence of several downward trending waves, namely the end of peak spending by the baby boomers and also saturation of existing technology (no new big inventions on the horizon). These coupled with the the markets always seem to take a turn for the worse during a new president’s 2nd year (they seem to lose the euphoria from the year before), and the fact that for some reason markets historically have their worst performing years in early years of a decade, all this means we are trending toward one big deflationary episode.
However, I feel even Harry doesn’t know how much the government/Fed will print to keep this thing going. In that sense I am still incredulous as to the final outcome.
You neglected to mention his “illuminatist” comments. The people have a right to know…