10 posts tagged “central banks”

Let me start out by saying that inflation due to the FED printing money has not begun. What inflation we have right now is cost push.

Here is some anecdotal evidence from my life. The last time I orderer a large sausage pizza it was $17.75 (up from $16.50 six months ago). Last week my favorite gyro meal cost $5.95 (up from $5.25 the last time I had one). A ride on the Chicago subway went from $2.00 to $2.25, and now they want to raise fares to $3.00.

Now take a look at empirical evidence from Shadow Government Statistics. It clearly shows we never had any deflation.

Why would businesses raise prices in a bad economy? Especially if demand for their product is elastic ~ raising prices decreases total revenue. The only logical answer is cost push inflation. This is a situation where resource prices (expenses) are rising so fast, producers feel the need to pass on those costs. What expenses?

• Miminmum wage is now $7.25
• Health Insurance
• Property and Casualty Insurance
• Government fees such as inspection and licensing
• Credit card processing fees and bank fess have increased for business owners
  
• Transportation - look at the move in oil since March 2009
• Agricultural commodities (which are inputs to cows, pigs, and chickens)

A new comprehensive economic survey shows that the recession has plunged 2.6 million more Americans into poverty, wiped out the household income gains of an entire decade and pushed the number of people without health insurance up to 46.3 million.

The nation's poverty rate rose to 13.2 percent in 2008, up from 12.5 percent in 2007, the Census Bureau data showed. That was the first significant increase since 2004 and the highest level in 11 years.

In a measure of the breadth of the decline, median household income -- the amount earned by a family at the exact center of the income scale -- sank 3.6 percent in 2008: from $52,163 to $50,303. In 1998, at the height of the tech stock boom, the comparable income was $51,295. All the figures were adjusted for inflation.

People in their prime earning years, between ages 45 and 54, took the biggest hit during the past two years. Their median income of $64,349 was down almost $5,000, or 7 percent. Everyone younger, plus those 55 to 64, lost 2 percent.

• Lehman Brothers filed for bankruptcy
• Bank of America agrees to buy Merrill Lynch
• The Federal Reserve keeps rates the same
  
• Oil drops below $100 a barrel
• The Dow falls 498.86 points

Goldman Sachs Software
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Mr. Facciponti said in the court, according to Bloomberg. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

Rouge Traders
The spike in oil prices to their highest level this year was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m of losses for his company. PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorized trading”. The privately owned company said that as a result of the unauthorized trades it had been forced to close substantial volumes of futures contracts at a loss.

Government Intervention
Since the CFTC limits the number of futures contracts that can be held in agricultural products in order to protect the market from manipulation, CFTC Chairman Gensler thinks the same standards should apply to energy markets. Result: driving down natural gas to unnatural levels.

While the Bureau of Labor Statistics is telling us inflation is under control, those who hide in savings bonds are getting short changed.

The stats are skewed because they exclude food and energy, but I'm sure you see that every time you fill up your car or buy groceries.

You can get a much better return using my strategy.

DXDDX - a mutual fund that moves up 2.5 times when the dollar index falls.

 Here are some reasons the dollar should continue to fall.

1. For the fiscal year ending Sept. 30, the Congressional Budget Office forecasts a record deficit of $1.75 trillion, almost four times the previous year’s $454.8 billion shortfall and about 13 percent of gross domestic product. Bear in mind that the target demanded of European nations wanting to join the euro was a deficit no greater than 3 percent of GDP.
2. David Walker, a former U.S. comptroller general, wrote in the Financial Times on May 12 that the U.S.’s top credit rating looks incompatible with “an accumulated negative net worth” of more than $11 trillion and “additional off-balance-sheet obligations” of $45 trillion.
3. The biggest problem is that external investors — particularly China — have more skin in the dollar game than in euros, yen or pounds, which makes the U.S. currency the most likely candidate to meet the cleaver in a crisis of confidence about post-crunch government finances.
4. If commodity prices rise and the US dollar falls, energy and food prices will remain relatively constant for everyone outside the United States (since all commodities are priced in US dollars)
   

The Fed and Treasury agreed to guarantee $306 billion of Citigroup's assets. They then created a $200 billion facility to buy asset-backed securities. Most radically, the Fed promised to buy up to $500 billion of mortgage-backed securities (MBS) guaranteed by government-sponsored entities including now-nationalized mortgage agencies, Fannie Mae and Freddie Mac, and up to $100 billion of direct debt.

The Fed will finance these programmes with newly created reserves; that is, it will print money. Its balance sheet, which has ballooned from $900 billion in August to $2.2 trillion now, could grow by an additional $800 billion, which would make it a larger lender than any commercial bank.

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Official COMEX gold future numbers are completely divorced from reality and banker manipulation is rife.

Panic buying of physical gold has gripped Europe, as consumers fear their savings accounts are no longer safe in light of numerous bank failures, prompting dealers to run dry on gold bullion, which in turn is driving up premiums.

Respected bullion dealers who charge lower premiums because they are able to buy gold in bulk are still slapping customers with $150+ premiums - and judging by the continued dearth of one ounce coins such as the American Eagle and the Austrian Philharmonica - people are perfectly willing to pay the exorbitant premiums.

The true value of gold is what people are prepared to pay to obtain it, and judging by that criteria, the actual value of gold is currently around $1,100 an ounce based on a conservative estimate. The official spot price of gold is currently around $840. Central bank manipulation is keeping the price in check. For more detail about this, read my other gold manipulation post. Here is another must read article!

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