Tag Archives: inflation

It’s a False ‘Recovery’: Look for more Economic Woes in the Fall and Winter

 

 

 

It astonishes me to hear the media people talking up the idea that somehow the recession is over and we’re safe and sound once again. 

Don’t you believe it. 

The Economic Fundamentals remain distressed, as in the article below, by the Financial Times.  This doesn’t even take into account the likelihood of a massive oil shock that will occur when the Israel/ Iran war kicks off which is likely to be in the fall or winter at the latest. 

I’m also astonished by the degree that one must work these days to get access to competent journalism instead of the ideological pabulum that passes for news today.  It’s the truth that sets you free not the propaganda!  The Bible maintains that the last days will be characterized by deception and the wonton disregard of the truth; and by that standard we’re defiantly in the latter days.  If you believe our economic woes have been fixed by Obama and the Socialist Democrats without dealing with the Fed flooding the world with our currency then I’ve got a bridge in Brooklyn to sell you.

The Government is out of control and getting worse and when the next round of economic disasters hit, given the surly mood of the country, we could see a cultural unraveling not experienced since the American Civil War.  They say a word to the wise is sufficient:  Take all precautions to protect your family and your economic viability because the economic disaster is about to get a lot more intense shortly.  Don’t Be Deceived!  Do your best to prepare now: shed all debts and don’t buy anything you don’t really need.  At some point there’s going to be a loss of confidence in the dollar and that’s where America gets its wings clipped in earnest. 

 

 

 

 

http://www.telegraph.co.uk/finance/markets/6018076/RBS-uber-bear-issues-fresh-alert-on-global-stock-markets.html

 

RBS uber-bear issues fresh alert on global stock markets

Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts.

 

By Ambrose Evans-Pritchard, International Business Editor
Published: 8:26PM BST 12 Aug 2009

Comments 34 | Comment on this article

Britain’s Uber-bear is growling again. After predicting a torrid “relief rally” over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.

“We are now in the middle of a parabolic spike up,” he said in his latest confidential note to clients.

 

“I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets.”

The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a “surge higher” in these gauges can justify current asset prices. Results that are merely “less bad” will not suffice.

He expects global stock markets to test their March lows, and probably worse. The slide could last three months. “A move to new lows is highly likely,” he said.

Mr Janjuah, RBS’s chief credit strategist, has a loyal following in the City. He was one of the very few analysts to speak out early about the dangerous excesses of the credit bubble. He then made waves in the summer of 2008 by issuing a global crash alert, giving warning that a “very nasty period is soon to be upon us” as – indeed it was. Lehman Brothers and AIG imploded weeks later.

This time he expects the S&P 500 index of US equities to reach the “mid 500s”, almost halving from current levels near 1000. Such a fall would take London’s FTSE 100 to around 2,500. The iTraxx Crossover index measuring spreads on low-grade European debt will double to 1250.

Mr Janjuah advises investors to seek safety in 10-year German bonds in late August or early September.

While media headlines have played up the short-term bounce of corporate earnings, Mr Janjuah said this is a statistical illusion. Profits were in reality down 20pc in the second quarter from the year before. They cannot rise much as the West slowly purges debt and adjusts to record over-capacity. “Investors are again being sucked back into the game where ‘markets make opinions’, where ‘excess liquidity’ is the driving investment rationale.

“The last two Augusts proved to be pivotal turning points: August 2007 being the proverbial ‘head-fake’ when everyone wanted to believe that policy-makers had seen off the credit disaster at the pass, and August 2008 being the calm before the utter collapse of Sept/Oct/Nov… 3rd time lucky anyone?”

The elephant in the room is the spiralling public debt as private losses are shifted on to the taxpayer, especially in Britain and America. “Ask yourself this: who bails out Government after they have bailed out everyone?”

Mr Janjuah said governments might put off the day of reckoning into the middle of next year if they resort to another shot of stimulus, but that would store yet further problems. “If what I fear plays out then I will have to concede that the lunatics who ran the asylum pretty much into the ground last year are back in control.”

Over at Morgan Stanley, equity guru Teun Draaisma thinks we are through the worst. “We were on course for a Great Depression in February, but Armageddon was avoided. Governments did not repeat the policy errors of the 1930s.”

“We have seen the lows of this crisis. This is a genuine rebound rally, and it has been short by historical standards so far,” he said.

Mr Draaisma, who called the top of the bull market almost to the day in mid-2007, has crunched the worldwide data on 19 major stock market crashes over the last century. They show that the typical rebound rally (as opposed to bear trap rallies, when markets later plunge to new lows) lasts 17 months and stocks rise 71pc. The 1993 rally in the US was 170pc over 13 months. Finland’s rally in 1994 was 295pc. Hong Kong rallied 159pc in 2000. This rebound is only five months old. The key indexes have risen 49pc in the US and 42pc in Europe. Mr Draaisma advises clients to stay in the stocks for now, but stick to telecom companies, utilities, and oil.

Yet he too expects a nasty correction once this rally falters. The usual trigger at this stage of the cycle is when central bankers start to make hawkish noises, typically a couple of months before the first turn of the screw (normally a rate rise, but in this case an end to “quantitative easing”. “As long as policy-makers are talking about how fragile the recovery is, equities are unlikely to go down much.”

This moment can be hard to judge. There has already been rumbling from some governors at the US Federal Reserve and from the European Central Bank’s Jean-Claude Trichet. Markets are pricing in rates rises by early next year.

The pattern after major financial bust-ups is that the rebound rally gives way to another fall of 25pc or so, lasting a year, followed by five years of hard slog as stocks bounce up and down in a trading range, going nowhere. Mr Draaisma suggests taking a close look at the chart of Japan’s Nikkei index from 1991 to 1999. Gains were zero.

We are in uncharted waters, however. Monetary and fiscal stimulus has been unprecedented. Russell Napier at Hong Kong brokers CLSA says a powerful bull market is already taking shape as the American giant reawakens. Perma-bears will be left behind. He said: “It is dangerous to be in cash.”

When the finest minds in the business disagree so starkly, the rest of us can only shake our heads in confusion.

 

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Oil will Usher in the Leading Wave of Inflation: Oil prices Higher while Government Destroys the Dollar

 

 

 

Here we go again.  I have the feeling that it’s going to be a rough summer, especiallyin July and September as a number of events combine to give us part two of the financial horror show that is our country.  California is in dire straits and has about fifty days left before its completely out of money.  Its politiciansare in gridlock as they continue to livein denial about the magnitude of the budget cuts necessaryto restore order and sanity to the state government.  Other states are going to be following suit, mostly all the big liberal states that havebought into the idea that government is your daddy and that government is going to take care of you.  The other big deal, also the product of denial on the part of Washington politicians, if not mass psychosis, is the extravagant borrowing if finally unleashing inflationthe leading edges of which revolve around gas prices as our dollar continues to plummet.

 

Perhaps you’ve noticed: Gas Prices have been Going UP!

 

Gas prices are in the $70 a barrel range now and within a week or two it’ll be in the $80’s.  As the stimulus spending is wasted by congress who now wants to shovel money faster in the economy, they weaken the dollar dramatically and thus oil and other commodity’s goes up.  It’s a vicious cycle and we’re in it. Some people say we’ll stabilize around $90 to $100 for a while and other prognosticators say that as the ObamaAdministration and the nefarious Federal Reserve trash the dollar that oil will just continue to go up until it destroys the economy.  Either way the prices are going higher and I suspect that we’re seeing the leading edge of an inflationary tsunami that will shortly engulf us in yet another agonizing summer of bad economic news. The Arabs are not likely to raise production until its in the low hundreds a barrel and the Russians are champing at the bit to drive oil as high as possible and recover some economic clout.

 

Consider the following story from the Guardian UK:

http://www.guardian.co.uk/business/2009/jun/10/oil-market-reserves/print

 

Oil price leaps to year’s high

Predictions of $250 a barrel on fears for oil reserves, hopes of economic recovery and hedging against weak dollar

  

 

The price of oilburst through the $71 a barrel mark today amid revelations that proven reserves had fallen for the first time in 10 years and predictions that the price could eventually hit $250.

The latest high – from lows of $30 only four months ago – came on the New York Mercantile Exchange, where the cost of July deliveries rose by $1.35 to $71.36.

This comes on top of a $2 rise the day before as investors rushed into the market on the back of lower stockpile figures, higher demand estimates and speculation against further falls in the dollar.

“I wouldn’t be surprised if we’re testing $80 in a week or two,” said one analyst, while BP‘s chief executive, Tony Hayward, questioned whether $90 could be the “right” value.

Kuwait’s oil minister, Sheikh Ahmad al-Abdullah al-Sabah, put some of the rise down to signs of recovery in Asia but warned that overall demand was still weaker than last year. Opec would not raise supply at current oil prices but did not rule it out “if it reached $100”, he said.

Alexei Miller, chairman of the Russian energygroup Gazprom, raised the stakes further when he reiterated last year’s estimates of $250 a barrel. “This forecast has not become reality yet, given that the [credit] crisis gained momentum and exerted a powerful impact on the global energy market. But does this mean that our forecast was unrealistic? Not at all.”

The latest surge has also raised fears that higher energy costs could snuff out the nascent economic recovery. Shares on Wall Street’s Nasdaq index fell 1%.

The febrile atmosphere in oil markets was fed by the publication of BP’s Statistical Review of World Energy, which showed that the world’s proven crude reserves had fallen by 3bn barrels to 1.258tn by 2008 from a revised 1.261tn in 2007.

Declines in important producers such as Russia and Norway offset rises in new areas such as Vietnam, India and Egypt. The figures did not include Canada’s tar sands, which are put at 150bn barrels.

The drop is partly attributed to a drop in exploration drilling due to the precipitous fall in oil prices last year but also to the end of “easy” oil. Conflict this week in the Amazon and speculation about Arctic drilling underlined how oil companies are pushing into environmentally sensitive places to find new reserves.

Tony Hayward, BP’schief executive, insisted there was enough crude to last 42 years at current consumption levels, roughly the same as last year. Adherents of “peak oil” – the theory that the maximum rate of oil production has been reached – believe supplies will run out much sooner because of growing demand.

The BPboss said: “Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world’s energy needs for decades to come.” Higher prices allowed companies to invest in finding further reserves while not choking off demand, he said.

“There is a rational argument to say that somewhere between $60 to $90 a barrel is the right sort of level,” he said.

Global oil consumption fell 0.6% to 81.8m barrels a day in 2008, the first decline since 1993 and the largest drop for 27 years. North Sea output dropped 6.3% to its lowest level for three decades.

By contrast, gas use rose by 2.5% globally and 16% in China. The use of coal, the heaviest emitter of climate-changing carbon, rose 3.1%, with Chinese demand up 6.8%, leaving it with a market share of 43% despite more high-profile announcements about its commitment to renewables.

BP says it is difficult to compare “primary” carbon fuels with renewable sources of electricity. BP notes that globally solar capacity rose nearly 70% and wind by 30% year on year but says renewables only generated 1.5% of global electricity and therefore began at a low base.But it notes these sources are playing an increasingly important role in some countries with wind power providing 20% of total electricity generation in Denmark, 11% in Spain and 7% in Germany.

Despite the 2008 rise in coal consumption, the BPdata showed growth in the use of the fuel continued to decline compared with 2007 when it rose 5% and five years ago when it went up by 8%.

But the coal figures will alarm environmentalists and increase the calls for companies and governments to speed up trials on “clean coal” technology and the use of carbon capture and storage.

China has promised to increase its use of renewables: Zhang Xiaoqiang, vice-chairman of the China’s national development and reform commission, says the country may produce as much as 20% of its energy from wind and solar by 2020.

Rebellion in the Puppet Theatre: When Governments Warn of Central Bankers You Know its Trouble

 

 

 

The Nefarious Federal Reserve System and the gangster Al Capone have much in common these days.  It seems the Federal Reserve has shed its cloak of inscrutability for more flamboyant apparel as it has taken a very public leading role in combating the “financial crisis”.  Clearly the long term interests of the Fed are served by secrecy.  The Central Banks are owned by the super rich and they have prospered by secrecy and a cloak of obfuscation regarding their role as the governments, government.  It’s as if Al Capone had forgotten he was a gangster and a thief and that he had caused the problems he’s now trying so publicly to solve. Like Al Capone the Federal Reserve has no legitimate role in the economy because all the problems it would solve are self generated by an oligarchy of super rich families who are on to the next phase of social engineering by perverting the economy to do their bidding just as they used education and the media.

The Robber Barons of old, the Morgan’s, Rothschild’s, Rockefellers, were Millionaires before the last great Depression and they came out the other side as the world’s first Billionaires.  The cycle appears to be repeating and the Billionaire elites of today will doubtless emerge as the world’s first Trillionairs at the expense of every human being, and government, on this Earth. The worlds banking elites see their power grow after each economic depression and they fund both sides in our world wars so they always come out on top.

The Governments of the West, led by the USA, which is in turn a wholly owned subsidiary of the Federal Reserve System, have effectively been looted by financial institutions and industries deemed “too big to fail” and now the finale will be hyperinflation. The Federal Reserve may have avoided a depression with aggressive actions but they have surely destroyed the US Dollar in the process.  I doubt that we will be able to avoid a depression when the worthless US Dollar implodes from the Machiavellian Machinations of the central banks and the supremely powerful elites who own it.

The Power Elite masters of money have been so successful at hiding their control that most people believe that the Federal Reserve System is a part of the Federal Government.  It’s about as much a part of the government as “federal express”.  It’s a consortium of profit making banks that prints our currency for us, at interest of course, and lends it back to us and manages the financial world with limited involvement by the government. 

The President appoints the head of the Fed from a list of candidates supplied by the Fed!  The government can’t audit the Fed and has no input, beyond advisory input, into its decisions, policies or procedures.  The Fed is a completely autonomous central bank of the United States and its power, as people are beginning to wake up and see, by far surpasses the government of the United States.  The Fed can give us life, or it can take it away; in a contrived financial rescue that destroys the currency and with it the United States of America.  The Fed doesn’t work for America, or our government: it works for its stockholders and directors: the world’s elite banking dynasties.  If they decide the US must lose power they can do it and there’s nothing our government can do to stop them.

For much of our recent history there’s this tacit agreement between the financial elite and Western Governments in which we all agree to pretend that the financial elite don’t exist and the governments are calling the shots on world affairs.  Governments come and go and yet our course seems to be the same because the real power behind the Democrats and Republicans is the world’s financial elite.  It’s their policies that rule our lives not the political puppet theatre that is beholding to big money for election and re-election and high paid lobbying jobs and speaking fees if they should lose office. People are upset because the government seems not to listen to us, the people, anymore and they’re right.  The government, our professional politicians, listens to big money that controls the economy, education, media and government itself.  We can’t do anything to the professional politicians that big money can’t fix so why should they listen to us?  The lack of term limits has destroyed our power and given rise to a puppet theatre of politicians who base their decisions on the will of the financial elite rather than the will of the people.

A funny thing happened in Germany recently.  Their Prime Minister, Angela Merkel, accused the central banks of the west of creating another big bubble that threatens the German economy and that of every other nation as well.  The Germans don’t speculate about the economic conditions of the Weimar Republic as we do because they lived through it.  They know exactly what it can do, and did do, to Germany and the kind of leaders that emerge in economic conditions of such desperation.  It’s not a theoretical exercise for them, as it is for us in America,  it’s a living memory of pain etched on the faces of their grandparents and great grandparents.  Perhaps it’s not surprising that the only voice of warning from western governments rises from Germany about the dangers of hyper inflation and trashing your currency.  It’s a poignant cry of national memory that the world would do well to heed but the world goes on spending and borrowing while Chinese Students openly laugh at our Treasury Secretary Geithner as he assures them their American investments are “safe”.

Check out the following Article from the Wall Street Journal about the German Governments Warning:

 

Germany Blasts ‘Powers of the Fed’

By JOELLEN PERRY

AFP/Getty Images

In a speech on Tuesday in Berlin, Chancellor Angela Merkel expressed ‘great skepticism’ over the clout of central banks and suggested their aggressive moves in Europe, the U.S. and the U.K. might backfire. She is shown here at a rally later in Saarbrücken, Germany, for European Parliamentary elections.

German Chancellor Angela Merkel, in a rare public rebuke of central banks, suggested the European Central Bank and its counterparts in the U.S. and Britain have gone too far in fighting the financial crisis and may be laying the groundwork for another financial blowup.

“I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line,” Ms. Merkel said in a speech in Berlin. “We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time.”

Ms. Merkel also said the ECB “bowed somewhat to international pressure” when it said last month it plans to buy €60 billion ($85 billion) in corporate bonds — a move that is modest in comparison to asset-buying by its counterparts, the U.S. Federal Reserve and the Bank of England. Details are to be unveiled by the ECB’s president, Jean-Claude Trichet, Thursday.

The public criticism is unusual — and not only because German politicians rarely talk harshly about central banks in public. When politicians around the world do criticize their central banks, they almost always gripe that they are too tightfisted.

The conservative German leader’s comments came as Europe’s statistical agency reported that unemployment in the 16 countries that share the euro rose to 9.2% in April — the highest level since September 1999 and still below the 11.5% that the European Commission forecasts for 2010.

However, the economic straits of countries within the euro zone vary widely. Germany’s unemployment rate of 7.7%, for instance, contrasts with 18.8% in Spain, where a collapse in the construction industry that was driving the economy has pushed unemployment to the highest in the euro zone.

It isn’t clear what triggered Ms. Merkel’s remarks, which came in a prepared speech. The ECB has been markedly less aggressive than the Fed or the Bank of England, particularly in moving beyond cuts in short-term interest rates to buy bonds to boost economic activity. However, German officials traditionally have been on the more conservative end of the central bankers’ spectrum, partly because the country’s hyperinflation of the 1920s is seared into people’s memories.

 

Reuters

European Central Bank President Jean-Claude Trichet will unveil Thursday details of a plan to buy some $85 billion in corporate debt. German Chancellor Angela Merkel said the ECB ‘bowed somewhat to international pressure.’

The ECB, the Fed and the Bank of England are increasingly vulnerable to criticism because they have played such a prominent role and crossed so many traditional lines in the past several months — even though they do appear to have steered their economies away from a repeat of the Great Depression. Neither the ECB, the Fed nor the Bank of England had any comment on Ms. Merkel’s remarks.

Her tough comments about the extent to which the central banks are intervening in the economy also come amid attacks on her by some in her conservative base for putting €1.5 billion of taxpayer money into a deal to shield Opel from parent company General Motors Corp.’s bankruptcy-protection filing.

Ms. Merkel’s critique jibes with statements from Axel Weber, the head of Germany’s central bank and a member of the ECB’s 22-person Governing Council. He has warned that too-loose monetary policy could fuel future inflation. Mr. Weber was among the body’s most vocal skeptics on asset purchases before the bond-buying program, reservations that were also shared by Jürgen Stark, another German on the ECB council. In a May 12 speech, Mr. Weber warned that overly generous monetary policy had helped build asset-price bubbles in the past.

In contrast, Athanasios Orphanides, the former Fed economist who now heads the Cypriot central bank, has been a vocal proponent of aggressive ECB policy. And many private-sector economists contend the ECB’s response to the global recession has been too cautious. The ECB cut its key rate to a record low of 1% in May. Mr. Trichet hasn’t ruled out further cuts, but most economists expect the central bank to stand pat Thursday and foresee the rate remaining at 1% for the rest of this year. The Fed cut its analogous rate nearly to zero in December and has said it will keep it there for some time.

Although the administration of President Barack Obama has carefully avoided criticizing the Fed, Republicans and Democrats in Congress have questioned the wisdom of the Fed’s power and its governance as they contemplate far-reaching changes to the nation’s financial regulatory structure. The senior Republican on the Senate Banking Committee, Richard Shelby of Alabama, recently asserted that “an inherent web of conflicts is built into the DNA of the Fed as it now exists,” a reference to commercial bankers’ role in overseeing the Fed’s 12 regional banks.

Some private economists — and a few inside the Fed — say the Fed’s aggressiveness is increasing the risks of an outbreak of inflation and creating the unwelcome perception that it will bail out big financial institutions when they take big risks that turn out badly.

The Return of the Gold Standard: Russia will propose this to Discipline the World Financial Systems

 

 

 

Russia and China and others have called for a new currency standard separate and apart from the US Dollar.  The recent economic storms have shown the weakness of our fiat dollar as the Federal Reserve prints money at an alarming rate and our Treasury Department spends it faster than it can be printed!  The people who are stuck holding the bag are the American People who see their savings made valueless by government malfeasance and creeping socialism.  The Chinese, the Arabs, the Russians, the Japanese and every other government on earth who holds much wealth in our ever deprecating dollar are fit to be tied as our policies devalue their wealth.  They were assured that the dollar would remain stable and the government would never take the steps we’ve now taken, and continue to take, to debase the value of our currency.  China has expressed alarm in recent weeks and the United Nations panel has openly called for a new world currency.  Europe has been making plans along similar lines but we continue to pursue a course that can only end badly for our nation and our dollar.

The only sane thing to do is to find an international unit of wealth, like gold, or perhaps some other combination of commodities that will force discipline on a currency and force governments to live within their means. Having the dollar backed by the thin air has given too much power to the Federal Reserve and Congress to follow their own agenda by siphoning off the wealth of the people who believed in the dollar and the integrity of the American System. It may well be the case that investing in the US Government becomes indistinguishable from investing with Bernie Madoff because the result is the same.

There are many problems with trying to go back to a gold standard and Russia is the first major nation to suggest it.  This will be a trend to watch because the world is quite serious about getting off the dollar and as our nation continues to debase our currency the world will change to something else.  Here’s an article from the Telegraph.co.uk and its URL:

http://www.telegraph.co.uk/finance/financetopics/g20-summit/5072484/Russia-backs-return-to-Gold-Standard-to-solve-financial-crisis.html

 

Russia backs return to Gold Standard to solve financial crisis

Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.

 

By Ambrose Evans-Pritchard
Last Updated: 8:23AM BST 30 Mar 2009

 

Arkady Dvorkevich, the Kremlin’s chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was “logical” that the new currency should include the rouble and the yuan, adding that “we could also think about more effective use of gold in this system”.

The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.

It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and “Great Society” social spending forced President Richard Nixon to close the gold window in 1971.

The world’s fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible – or less likely – under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.

China’s government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the “Bancor” proposed by John Maynard Keynes in 1944.

The Dollar Drops, Oil Spikes: And the Federal Reserve Marches US off a Cliff

 

 

 

The insanity of the Federal Reserve manufacturing another Trillion Dollars in advance of the Treasury offering 2 Trillion of American Debt as Treasury Bonds.  Given the deteriorating economies on earth it begs the question as to just who they think is going to buy all this debt when virtually every nation on earth is issuing bonds to “stimulate” the economy. The announcement of the Federal Reserve’s action caused the Dollar to drop sharply and commodities like oil to increase about 7%.

It’s going to be an interesting week as Wall Street contemplates the magnitude of the Federal Reserve’s Actions and reacts accordingly.  There’s no explaining the stupidity of the Fed Actions and I think it’s a legitimate question to ask Bernanke:  Just whose side are you on, Ben?” Consider this article from the Associated Press and take a good look this week at gold prices and oil prices and the like because as this sinks in the prices are heading north.  This may be the leading edge of an inflationary tsunami that will engulf America and usher in the worst economic conditions within living memory.

 

Oil prices reach new high for 2009 as dollar falls

Oil hits high for 2009 as Fed actions send dollar plunging; OPEC cuts take hold

 

NEW YORK (AP) — A weakened dollar and evidence that OPEC has significantly slowed production sent oil prices soaring to new highs for the year Thursday.

“I think we’ll see higher oil prices for a while,” said Michael Lynch, president of Strategic Energy & Economic Research. “There’s an expectation that the market has bottomed out.”

Benchmark crude for April delivery surged $3.47, or 7 percent, to settle at $51.61 a barrel on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.

Crude prices have increased 11.6 percent since OPEC ministers met in Vienna on Sunday. The group said it would not cut production again immediately, but there is growing consensus that the millions of barrels taken off the market already each day are starting to balance a supply and demand picture that has been skewed for months.

With the April contract set to expire Friday, most of the trading had shifted to the contract for May delivery, where prices jumped $3.14 to settle at $52.04 a barrel.

Gas prices increased 1.3 cents a gallon overnight to a new national average of $1.933 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are 2.7 cents a gallon cheaper than a month ago and $1.346 a gallon cheaper than last year.

Analysts rushed to buy crude after the Federal Reserve announced late Wednesday it would buy long-term government bonds, a measure that’s expected to jolt the economy with lower rates on mortgages and other consumer debt.

The Fed also said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets.

The announcements sent the dollar into a tailspin. The U.S. dollar dropped against other major currencies almost immediately, at one point falling to levels not seen since January. The dollar has fallen about 5 percent against the euro over the past couple days.

Because oil is bought and sold in dollars, a weak U.S. currency makes crude cheaper globally.

“The government is basically printing money to buy back all this paper, and it devalues the dollar,” said Phil Flynn, analyst at Alaron Trading Corp.

Flynn said the rise in oil shouldn’t be taken as a sign that the economy in on the mend. The Fed is using all of its powers to prop up American businesses, “and this is one of their last shots,” Flynn said. “If this doesn’t work, they’re out of bullets.”

A government report that said jobless claims set a new record for the eighth straight week. The Labor Department said continuing claims for unemployment insurance jumped 185,000 to a seasonally adjusted 5.47 million, another record-high and more than the roughly 5.33 million that economists expected.

Initial claims dropped to a seasonally adjusted 646,000 from the previous week’s revised figure of 658,000, however. That was better than analysts’ expectations.

Job cuts are part of the reason for a severe drop-off in miles driven by Americans, a growing number whom no longer commute to work.

The Federal Highway Administration said Thursday that motorists logged seven billion fewer miles in January, 3.1 percent less than the same period in 2008.

The dour economic news did little to dissuade investors as prices topped $50.47 a barrel, the previous high for 2009.

Part of the reason is that the Organization of the Petroleum Exporting Countries appears to be pushing through the production cuts it promised to make last year, according to tanker tracker Oil Movements. Member states agreed last year to squeeze global oil supplies, trimming 4.2 million barrels per day.

Crude exports from OPEC countries have been shrinking during the past few months. They’re expected to drop 770,000 barrels a day in the four weeks leading to April 4, according to an Oil Movements report.

While the recession kept oil near five-year lows, tighter supplies in the spring and summer should buoy crude prices in the next three months, the report said.

Cameron Hanover analyst Peter Beutel said a new high at closing Thursday, along with OPEC production cuts, the federal stimulus package and other bullish factors “are working together to be more important at this moment than the recession and its impact on demand.”

“It means things are better than they’ve been in a while,” Beutel said.

Also surging were natural gas prices after a government report showed that U.S. stockpiles fell slightly more than expected last week.

The Energy Information Administration report said inventories held in underground storage in the lower 48 states fell by 30 billion cubic feet to about 1.65 trillion cubic feet for the week ended March 13.

In other Nymex trading, gasoline for April delivery jumped 7.16 cents to settle at $1.4373 a gallon, while heating oil rose 9.2 cents to settle at $1.36 a gallon. Natural gas for April delivery jumped 49 cents to settle at $4.174 per 1,000 cubic feet. In London, Brent prices rose $3.01 to settle at $50.67 on the ICE Futures exchange.

Associated Press writers Ernest Scheyder in New York, George Jahn in Vienna, Austria and Alex Kennedy in Singapore contributed to this report.

 

Bernanke’s Folly and the Second Great Depression:

 

 

The unfortunate Benjamin  Bernanke, the historian and scholar of the great depression, has found to his chagrin, and our undoing, that he is to banking what Ehud Olmert is to Israeli war fighting.  He has, with his bail out of Bear Sterns, unleashed a title wave of inflation that is likely to wash away the world financial structures as we know them.  Bernanke acted to save banking and destroyed everything else ultimately including banking. I heard that Goldman Saks thinks we could have $200 oil yet this summer.  Five bucks a gallon is cheap compared to $7.50 a gallon for Christmas.  This insane inflation wave is about to bring spending around the world to a standstill and what banks are still standing are going to be very reluctant to lend anyone a dime.  My conclusion is that the financial meltdown started in the mortgage loan crisis, gave rise to the financial crisis resulting in Bernanke’s folly, the complete undermining of the dollar and complete destabilization of the oil market resulting in what is likely to be the next Great Depression.  

            There is no stopping oil going right through the roof and I would not be surprised to see $8.00 a gallon at the pump by New Years. As bad as the continuing rise in prices in gas is the unbelievable speed with which its occurring. It’s the speed that’s going to tank, and I mean TANK, the stock markets around the world.  It’s the speed of the rising prices that means consumers  and businesses have hit the breaks, big time, on any discretionary spending until we know what’s on the other side.  Unemployment is going to show a huge spike as people react to the massive oil increases being passed on to consumers in every sector of commerce.  Already there is reporting on companies closing stores and the tightening of belts. No one says anything like “It’s as sound as a dollar” anymore: If they have a functioning brain they seem to be saying, “It’s as sound as a barrel of crude oil”.  In the new normal that the unfortunate Mr. Bernanke has unleashed on us the value of oil has become the lifeboat of choice: forsaking and relegating the US Dollar to the dustbin of history.  Oil has no end in sight and we are simply a day late and about 9.5 trillion dollars short.

            Politically speaking this could not have happened at a worse time.  The Republicans and the distinctly unpopular George W. Bush are about to get the blame for real terror in American families that is due to hit just before the presidential election.  The result may well be the election of Obama, our first socialist president since we all know that Bill Clinton was the first Black President, and an overwhelming democrat majority in congress.  Imagine all those socialist democrats in office when an economic crisis of this magnitude unfolds: they will have the government controlling everything.  By this time three years from now you’re going to have high unemployment and it won’t be possible to tell the difference between America and Europe. The one lasting gift of the unfortunate Mr. Bernanke, to posterity, will be the end of America’s leadership of the world and the return of Europe to planetary leadership.  Yes, our “sophisticated” friends, the Europeans, will return to the leading role having hopefully learned from two world wars and soviet communism, to chart a less bloodthirsty role for itself. The political landscape in America is about to be permanently changed because the Federal Reserve once again made a fatal miscalculation. 

            The Bible makes it clear that the Europeans are in a leadership role in the end times.  The United States is not referred to in any clearly identifiable way.  I suspect that Pax-Americana is going to be the object of no small amount of nostalgia in the brave new world we are entering.  All things come to an end and history is repeat with mighty empires that were destroyed or as in the case of Ancient Rome and the USA, collapsed from their own complacency.  I’m afraid there are just three constants in human history to date:  Death, Taxes, and people like the Unfortunate Mr. Bernanke. 

            Check out this link for more on coming attractions:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml

Hard Times Ahead: How Oil Prices, Inflation, and the Falling Dollar will Produce a Global Depression.

 

                              We live in a time when the USA owes trillions of dollars to other countries.  All the Social Security money and Medicare money has been spent, instead of saved and invested, and the Baby Boomers are now starting to retire.  We’ve been in denial about our energy sources, and our energy production all these years and now oil is spinning out of control and taking the world’s economy with it.  Because we’ve been in denial about credit, from credit cards and personal debt, to mortgage lending, to all the crazy financial instruments of today, we’ve been forced to devalue our own currency,  at an alarming rate. About three months ago during the Bear Sterns fiasco we hit what I think will be the trigger point for the next Great Depression which I fully expect within three months from now.

               Here is how the song is sung, sing along with me, wont you?  First we gave mortgages to every clown out there with no regard to credit worthiness.  Next, we got into big trouble when major financial firms were suspected of being unsound so we rapidly expanded credit while debasing our  US Dollar. With the dollar in the basement, the oil speculators went wild, figuring that oil is the place to be when you can’t trust a dollar anymore.  The oil prices are off the charts and this in turn exacerbates the problem of the falling dollar, while also causing gas, food, and shortly the price of EVERYTHING ELSE TO SPIKE. Our creditors look at us with disbelief while we refuse to develop and drill our own oil and our politicians preach that we “Cant drill our way out of this”.  We lower interest rates to support our exploding debt while the bill for our “entitlements” come due without a rational policy for entitlements.  It usually takes about six months for a disaster to express itself in the economy.  I think Bear Sterns started the clock.

               Now we  know what an alcoholic feels like because we, like the alcoholic, have lived in denial all this time about basic matter concerns with our survival.  Money needs to be worth something.  We need to live within our means.  We only grant credit to people who are credits worthy. Building oil refinery’s so we always have plenty of capacity, drilling our own oil, while doing our best to minimize the ecological impact, is not optional: WE MUST DO IT. We need to place logic and reason ahead of our self image and desire to be environmentally hip.

We have so many years of poisonous class rhetoric and “identity politics” that we can’t avoid racial and class violence during what is sure to be a major social upheaval. In the Great Depression of the thirty’s, crime actually went down.  They had social workers interview people and ask them why they didn’t turn to crime when facing destitution and Respondents mostly always said: “Because that would have been wrong.”  People don’t act that way anymore. This time around there is going to be violence.

               When I was a kid, I used to be amused at all those little pamphlets that the religious nuts would hand out to anyone that would take them.  It was always titled something dramatic like “Beware the Mark of the Beast” or “Don’t Take the Mark of the Beast!” The idea of all the governments of the world coming together to create a one world economic system was absurd.  Give unto me, a break, I would think, and shake my head ,while pondering the prospect of all the different governments cooperating on anything! For crying out loud: Our own government can’t agree that we should drill for oil and deport illegal aliens!  In my wildest dreams I could not imagine anything that could produce such an event.  I can now.

               If I’m right then we’re on the cusp of a real live depression, at a time when we are about to elect a real live socialist, Barak Obama. How would a dyed in the wool socialist get us out of a world curency crash?  Eh?  I suspect that the world’s central banks will band together to create a super currency, or at least regional currencies, like the Euro and the coming Amero.  I think banking, and currency will be stabilized in order to stabilize the oil prices.  I suspect that while all this is going on we are going to have massive inflation to essentially reduce, to manageable levels, the amount owed to the Baby Boomers for their Social Security and Medicare. Given all the security concerns, and the massive illegal immigration going on, in both Europe and America; we’ll need tamper proof ID’s that will probably have biometric properties. This would also be a good way to tackle identity theft and government pension plan controls and even medical records that are tamper proof. 

               The bible puts it this way:

Ezek 7:10-13

10 “The day is here! It has come! Doom has burst forth, the rod has budded, arrogance has blossomed! 11 Violence has grown into a rod to punish wickedness; none of the people will be left, none of that crowd — no wealth, nothing of value. 12 The time has come, the day has arrived. Let not the buyer rejoice nor the seller grieve, for wrath is upon the whole crowd. 13

               It sure looks to me like we are on the cusp of a global crisis that is likely to usher in the first of our global solutions and global institutions to defend the “common good”.  It’s strange how so much of it just happens to line up so close to those goofy pamphlets the religious nuts handed out long ago.  And they got it from a book by lots of different authors written over thousands of years that seems to have so much to say about today’s headlines!   Must just be a coincidence huh? I leave you with the following thought from the New Testament.  Peace be with you.

Rom 13:8-14

8 Pay all your debts, except the debt of love for others. You can never finish paying that! If you love your neighbor, you will fulfill all the requirements of God’s law. 9 For the commandments against adultery and murder and stealing and coveting — and any other commandment — are all summed up in this one commandment: “Love your neighbor as yourself.”   10 Love does no wrong to anyone, so love satisfies all of God’s requirements. 11 Another reason for right living is that you know how late it is; time is running out. Wake up, for the coming of our salvation is nearer now than when we first believed. 12 The night is almost gone; the day of salvation will soon be here. So don’t live in darkness. Get rid of your evil deeds. Shed them like dirty clothes. Clothe yourselves with the armor of right living, as those who live in the light. 13 We should be decent and true in everything we do, so that everyone can approve of our behavior. Don’t participate in wild parties and getting drunk, or in adultery and immoral living, or in fighting and jealousy. 14 But let the Lord Jesus Christ take control of you, and don’t think of ways to indulge your evil desires.

NLT