US Exporting Inflation and Unrest

“Trader Dan” Norcini, www.jsmineset.com, 01/28/2011 [Excerpt]

…There is no doubt that some of the buying in gold is tied to events in Egypt and across some of the other nations in the Middle East. There are many nervous investors who are eying that tinderbox of never ending troubles and are concerned about these demonstrations spreading and moving into the OPEC nations. That is the reason crude oil was up nearly $4.00 a barrel at one point.

It seems to me that the catalyst for the huge amount of unrest in the region of the world was the surge in food prices. One of the things that the wheat market has been watching and anticipating has been Egyptian wheat purchases. They are one of our largest buyers of wheat and there was talk that began last week and continued earlier this week that Egypt was going to be forced into buying a good deal more US wheat in an attempt to make sure that there was sufficient supply for one thing and that they could snag it before its price moved even higher. Their leaders no doubt saw what happened to the government of Tunisia and wanted to nip any potential problem in the bud. Apparently things moved too quickly for them. Regardless, we have been warning that this outbreak of the inflation virus, a virus I might add which has been fed, nourished, propagated and even lovingly caressed by the US Federal Reserve, was going to result in global instability as its effects were primarily being seen in the cost of food. Rising food prices in the undeveloped world are NOT INGREDIENTS for peaceful society. Read more»

Fed Uses Accounting Gimmick to Hide Losses

Alex Newman, www.thenewamerican, 01/24/2011

The Federal Reserve announced that it would use a new accounting trick to conceal potential losses on its massive investment portfolio, transferring its liabilities to the U.S. Treasury instead. The new methodology would essentially prevent the central bank’s bankruptcy — on paper, at least — right as the debate on its solvency heats up. But the move is already raising eyebrows among analysts, who say it could severely impact the credibility of both the Fed and the U.S. government.

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Down Argentine Way

Ron Holland, www.dailybell.com, 12/22/2010

There are many ominous parallels between Argentina and the U.S. and the question often asked is can America avoid the economic consequences that Argentina suffered from a fascist government combined with government debt and currency collapse? I believe the answer is likely NO!

“There are a lot of ways to ruin an economy. Argentina has experimented with most of them. It has devalued its currency, and revalued it. It has pegged it, and then knocked down the peg. It has regulated, controlled, inspected, taxed and confiscated. Following the 2001 crisis, earnings fell by 30% – with half the nation slipping below the official poverty line. What is remarkable is that the Argentine economy has survived at all.” – Bill Bonner

Down Argentine Way was the 1940 film that made a star of Betty Grable, who played an attractive young woman on vacation who fell in love with a wealthy racehorse owner. The storyline actually reflected a common occurrence during the 25 years prior to the film debut. Read more»

The Lessons of History

Victor Sperandeo, online.barrons.com, 12/18/2010

When governments cannot borrow, hyperinflation is frequently the result.

Economist Philip Cogen defines hyperinflation as a non-annualized inflation rate of 50% or more in a single month. This rare occurrence should not be confused with the inflation the U.S. went through in the 1970s, which was moderate, almost normal, by comparison.

Unlike normal inflation, which may be attributed to a variety of factors, hyperinflation has a single cause: It occurs when a government cannot borrow money because its debt has risen so much that investors believe they will never be paid back with close to the same purchasing power. As a consequence of this flight of confidence, such a government is forced to print money to meet its obligations. This further undermines the value of its currency, often culminating in a frenzied collapse. That is hyperinflation, and only governments and central banks cause it. Read more»

Deepening crisis traps America’s have-nots

The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature.

Ambrose Evans-Pritchard, www.telegraph.co.uk, 01/09/2011

There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc.

Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc.

Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.

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Exporting Revolution

Dan Denning, dailyreckoning.com.au, 01/16/2011

If there’s one lesson to have learned over the weekend it is this: inflation can lead to revolution. That may be putting it simply. But the task of today’s Daily Reckoning is to show that the love of bad money is the root of all politically-destabilising price increases in the developing world.

That doesn’t exactly roll of the tongue. But it may explain why Tunisian President Zine al-Abidine Ben Ali is watching the events on the streets of Tunis from a hotel in Saudi Arabia. The Tunisian President fled the country after his efforts to placate protestors failed. Read more»