Bearish News

A broad index of commodities, as tracked by IndexMundi.com (great site), is up 252% in the last 10 years.

So when an influential idiot like Christina Romer says, “the spectre of inflation is quickly fading”, as she did on Bloomberg TV recently, it makes one wonder. What is the time period these people are looking at? A week? A month? Only ones when commodities are down?

Stop to consider the fact that these price increases have occurred despite stagnant wages (the Keynesian’s preferred deflation argument being that inflation cannot occur without matching wage hikes) AND crawling money-velocity since the crunch. No matter what the Fed does, it is screwed going forward.

1. Tighten? Raise rates. Crush increasingly credit-dependent zombie economy (and banks, for some reason the Fed seems to favor the institutions who own it)
2. Expand lending? Massive inflation, continuation of zombie economy.
3. Keep lending slow, monetize debt. Hyperstagflation, ugly.

If I had my pick, I would of course go #1. Every time. But that’s not likely to be the case (for a while yet).

And regarding investment choices today, they’re a bit like a school cafeteria; sh1tty choices, but clear winners. I am looking to buy more precious metals and foreign bonds (pizza & french fries).

Nice compilation of clips featuring the founder of Grant’s Interest Rate Observer. He talks Fed, monetary policy, the gold standard, and more. Bonus: Margaret Brennan is the interviewer in 2 clips.

When nothing seems to help, I go and look at a stonecutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did it, but all that had gone before.

Jacob Riis

Gold had another up day with stocks, as it was ‘risk on’ with renewed hopes for fresh infusions of liquidity as we saw from the Bank of England.

I tended to view this action as more ‘technical’ than fundamental.

I don’t like the headline correlation between stocks and the metals like gold and silver which would normally function as a safe haven in a time of increased risk.

Notice the new lines of broad support and resistance levels on the gold chart. We have not yet broken to the upside, so caution is advised.

Guest post by Jesse of Jesse’s Cafe.

Please bear in mind that the DX dollar index will become increasingly irrelevant because of its outdated structure, heavily weighted to the euro yen and the pound, to the exclusion of the emerging currencies and the precious metals.

The shorter term chart has been rallying largely on euro weakness. We might see another eurodollar short squeeze if things continue to deteriorate in the European banking system.

A stronger dollar is something that the wealthy and the financial sector may enjoy, to the detriment of the rest of the country and any hopes of economic recovery.   However the realities of things make a stronger dollar problematic.

So the next best thing is to slowly devalue the dollar by printing money and selectively distributing it, with tax benefits, to the most powerful and fortunate members of society.

In a ‘free market’ for currencies the dollar would have been much lower by now because of the persistent trade deficit, and the enormous dollar balances held by some of her trading partners.

The financial engineers favor a slow decline so as not to disclocate any of the major banking concerns. The currency discussions between China and the US are political theater for their respective peoples and the currency tourists, i.e. the small speculators who provide a snack for the wolves.

For more, visit Jesse’s Cafe.