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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Rising Prices and the Inflation Genie

Economics / Inflation Jun 24, 2008 - 11:33 AM GMT

By: David_Vaughn

Economics Do you believe in high prices? Do you believe that the cost of every day living is climbing substantially higher? I just don't know. Our government has not warned us yet of a real inflationary problem. So the 5 dollars a gallon I now pay for milk is just an illusion. 4 dollar gas may also be an illusion. We must be guided of course by our government as to whether or not inflation is a real threat. So the government remains telling us that we are merely on the edge of an inflationary problem. I feel better already.


“…we are all suddenly talking about inflation. The genie is out of the bag and it's going to be impossible to get him back in.” “Mark my words, inflation is about to accelerate as the authorities attempt to deal with this now-inevitable derivatives crisis. I would advise you to keep your eyes on the inflation train coming down the track, rather than the butterflies on the buddleia on the sidings that the central bankers would have you look at.” Money Week, 11-06-8

I'll be so glad when Obama becomes president. I believe President Obama will do a great job keeping us informed as to the real state of the economy. Pay checks are not rising. Yet the cost of gas and food are going up and not down. So far I still see a lot of nice new cars on the road but I know that none are paid for and probably never will be.

“How rising home values, easy credit put your finances at risk” “During the housing boom, from mid-2001 to early 2006, banks raised card limits at a blistering pace across the nation, in part because of a surge in home equity, much of it now vanished.”“Today, the mix of high-rate debt and meager home equity has squeezed consumers - and threatens to prolong the economic slowdown.” “The consequences are visible. Foreclosures are at record levels. And credit card delinquencies are nearing a six-year high as millions of borrowers struggle to keep up with a record load of revolving debt, mostly on credit cards.”

“Card issuers extended too much credit, too quickly because of the "phantom equity" in people's homes, says William McCracken, CEO of Synergistics, a financial-services research firm.” “Today, the Bakers owe $30,000 on credit cards and $105,000 on a home worth only $63,000. They blame themselves but also say lenders share responsibility for "making it so easy" to borrow.” “Borrowers are turning back to cards because "the spigot has been turned off on home equity lending," says Mark Lauritano of Global Insight, a research firm.” "I'm sacrificing all over the place, food, gas and necessities," he says. "It's a real struggle." wbir.com

What have I said before? Get out of debt. Or if you can't totally get out of debt reduce where you can. Use that saved college money for your kids to take care of debt now. They will find a means to get an education when they are older.

“Gold Prices Will Reach $8,500”“In the long-term it does not matter what central bankers say. What matters is what they have done. Gold and oil are going to go a lot higher. But how high? I'll tell you.” “…we are all suddenly talking about inflation. The genie is out of the bag and it's going to be impossible to get him back in.” “…it is too late for that. Pandora's Box has been opened.”“In the long-term it does not matter what central bankers say. What matters is what they have done. Gold and oil are going to go a lot higher. But how high? I'll tell you. Perhaps $8,500 for gold and $400 for oil.” Todaysfinancialnews “

“ Asia 's needs and ethanol usage increasing have helped to put an end to falling food prices.” “The end of low-priced food.” “Wheat has doubled in price to 400 dollars a ton. Corn is exceeding world records.” “One well known food index is at the highest it has ever been since 1845.”

Of course China and Asia and their almost 3 billion population aren't helping matters as they also like to eat. The demand for meat is also on the rise in Asia . One third of corn is bought by the US Government for ethanol production. Many believe that global worming will cut world farm output significantly within another ten years. China continues to suffer from higher food prices that have driven inflation higher. Chinas food consumption is 23% of the world total.

“On the opening day of a two-day "strategic economic dialogue," the head of China's central bank said the United States used to be a model for how to manage an economy, but was of interest now because of mistakes it made that caused the subprime mortgage crisis.” theoutlook.com

Chinas urban population is growing almost 20 million people a year. And do we dare mention the price of oil? The US buys oil in US dollars which continue to go down in value. The hit Americans feel comes from a sinking dollar raising the price of oil. The plummeting dollar probably accounts for over 20% of the price Americans are paying to fill their autos.”

David, How many morons out there? Do you or anyone else out there thing I'll sell the gold I've accumulated for paper currency. Fat chance!!!! I say thank you for the dip gold because I can now add to my position on the cheap. Gold is the only thing out there that hasn't doubled or tripled from its price in 1980. Before it's all said and done GOLD will make me wealthier than I ever could emagined. I'm already on the pedistal just bring it on DUDES!” Ed

Just how fast can change occur? How about the automotive industry? The once mighty SUV is dead. Gas price too high to run any more. Car owners are scrambling to purchase smaller cars and whatever provides higher mileage. The bottom has also fallen out of the light truck market. What is surprising is not the fact that SUVs are now dead, but how quickly they died. The sales of gas saving passenger cars has exploded literally overnight. Small car sales are what is keeping the auto industry afloat. Hang on to your Corollas and Civics.

“Gold Investments Market Update − Royal Bank Of Scotland Issues Crash Alert and BIS Warns of Great Depression” “… inflation pressures continue to grow. “ “As long as the Federal Reserve continues to keep real interest rates negative and money supply in the U.S. ( M3 which is the broadest and most important money supply measure) and internationally continues to surge at unprecedented rates, the dollar will remain weak and gold will remain in a bull market. Especially with macroeconomic conditions looking like a more virulent version of the stagflation of the 1970s.” “Global stockmarkets are braced for one of the worst crashes in 100 years, according to the Royal Bank of Scotland (RBS) credit strategy team. RBS credit strategy team, in a special report for clients, said it expects inflation to paralyse economies and spark the crash. The report advised investors to be prepared for a severe downturn…”

“Meanwhile, the Bank of International Settlements (BIS) has continued to warn of a possible second Great Depression. The Bank for International Settlements, the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s. In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the U.S. sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.” “According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.” FXSTREETS.COM, 6-16-2008

It's not too late to invest in gold related equities to take advantage of their wealth generating attributes. We are living in the last days of cheap resources and cheap commodities. Gold Letter, Inc. reviews undervalued gold stocks poised to rise in this time of increasing demand.

Click here to order Gold Letter

Don't forget to email.

By David Vaughn
Gold Letter, Inc.
David4054@charter.net

© Copyright 2008, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2008, Gold Letter Inc.

David Vaughn Archive

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