Banks Will Still Profit in this Faltering Economic Recovery

A weekly excerpt from the subscription issue of The International Forecaster, taken from Bob Chapman's weekly publication. August 18 2010:

The objectives of Keynesian economics, keeping the profits of banks intact, treasury and fed want to keep gold down, reconsider the recovery, weapons sale to Saudi, and other failures in economic and fiscal judgement.

When government interferes with free markets they cease to work properly. Measures that interrupt and manipulate distort markets on a short to intermediate basis, but the final result is never in doubt. Things are altered but only little changed. What is serious about intervention is that it breaks the social and political contract between government and the people. This is the type of social engineering and pragmatism espoused by John Maynard Keynes, which brings us to where we are today. If Keynes were still alive he would witness the failure of the system, he was instrumental in creating it. Keynesianism is in part economic theory, but its real goal is the social-governmental manipulation of markets intended to concentrate government power in the hands of the corporate few producing corporatist fascism as the final economic and financial power under such a system and the final implementation, which ends in the brute force and the manipulation of laws for its completion, which is totalitarian government. http://en.wikipedia.org/wiki/Keynesian_economics

Keynesianism is part of the quest for power, commercial and political, which was attempted in Italy and Germany in the 1930s and 1940s. You might say this was the modern testing ground, financed and abetted by internationalists sources in London and New York. When these sources attempted to ensconce General Smedley Butler as the American president in the early 1930s, and he understood what they were up too, he ended his relationship with the crypto-fascist government, which at that time was in the process of being forced on the American public. Thus, this economic and financial theory of Keynes was part of the rise of corporatist fascism. His ideas and those of others were never able to capture the imagination and following of the American people, thus today it is being forced upon them. The theory is we know better what is good for the people than they do. This allows the elitists to control political power by controlling both major parties from behind the scenes. People do not want this kind of government and do not willingly embrace it. As a result it has to be forced upon them by using economics, politics or the distortion of the law. Thus, we see the pragmatic rise of Keynesianism as an integral part of the effort to bring about total dictatorial power on a scale only previously attempted during the reign of the Roman Empire. This fellow Americans is what is being done to you, your country and your culture.

Each passing day more and more observers come to the conclusion that there has not been and will not be a recovery in the sense that they believed there would. The proof is the actions the Fed has taken to use additional monetary easing and to continue zero interest rates. We forecasted such events some six weeks before they occurred and believe the Fed will have to inject some $5 trillion over the next two years just to keep the economy going sideways.

As Treasury Secretary Geithner assures us of recovery, Mr. Bernanke assures us that enough stimulus will be added to achieve that recovery. As this transpires the economy falters. We can promise you this all has little to do with the economy, which is an after thought and everything to do with keeping the profits of financial institutions in tact and growing. The stimulus is upon us.

Not only is the Fed going to purchase Treasury and Agency paper with the interest they have received from the CDOs and MBS they purchased from mostly financial institutions, but also they intend to sell that paper back to the sellers. The Fed refuses to tell us what they paid for this toxic garbage, so we will assume it was 70% of the face value. They will now sell these bonds back to the lenders for 25% of face value. The American taxpayer gets to pay the difference. The lenders make out like bandits and the Fed will have cleared its books of what was $1.8 trillion of assets at $1.35 trillion. Ostensibly, the Fed will use those funds to purchase Treasuries and Agencies.

In addition the banks are sitting on $1 trillion plus, which they borrowed from the Fed at zero interest rates and then lent back to the Fed at 2-1/2%. We believe that interest rate will either be reduced or eliminated. The banks can either return the funds or lend them. Under the fractional banking system that can be at any multiple. Lending nine times assets is considered normal. The banks presently are committed for an average of 40 times. Even at five times they can lend $5 trillion if they can find borrowers. A combination of purchases by the Fed and lending by the banks will furnish the required liquidity needed to keep the economy stable, albeit temporary, for the next two years. We believe this is the Fed’s plan, which we exposed a number of weeks ago, while most experts were sleeping. The insiders know and we watched what they were doing and in their greed they exposed the entire plan.

The flip side of the plan is that monetization causes inflation and in this case perhaps hyperinflation. That infusion of capital could keep the stock market at an unreasonably high level, as it is assisted as well by zero interest rates. The great danger is higher gold and silver prices, an indication of higher inflation and loss of purchasing power. That is why, over the past 15 years, the Treasury has manipulated and suppressed gold and silver prices, via the “President’s Working Group on Financial Markets.â€