Dow Chemical Raises Prices, Paving Way for Hershey, Monsanto


May 29 (Bloomberg) — Dow Chemical Co., the largest U.S. chemical maker, may not be the last to raise prices this year because of soaring raw materials costs.

Monsanto Co., Hershey Co., General Mills Inc. and Avery Dennison Corp. may follow suit, according to data compiled by Bloomberg. They’re among 11 companies in the Standard & Poor’s 500 Index that increased their so-called LIFO reserve, which captures rising inventory costs, by at least 20 percent over the past four quarters.

With oil and commodity prices at record highs, companies will be forced to pass on higher costs, analysts said after Dow Chemical announced yesterday it will raise prices by the most in its 111-year history. That will contribute to inflation, and may prompt the Federal Reserve to raise interest rates for the first time in four years.

“We are going to see a cascading of higher prices through the system,” said Steve Hoedt, who helps manage $34 billion, including Dow Chemical shares, at National City Corp. in Cleveland. “Companies that are able to push prices through to their customers are the ones that are going to be successful.”

Read moreDow Chemical Raises Prices, Paving Way for Hershey, Monsanto

US and European debt markets flash new warning signals

The debt markets in the US and Europe have begun to flash warning signals yet again, raising fears that the global credit crisis could be entering another turbulent phase.

The cost of insuring against default on the bonds of Lehman Brothers, Merrill Lynch and other big banks and brokerages has surged over the last two weeks, threatening to reach the stress levels seen before the Bear Stearns debacle. Spreads on inter-bank Libor and Euribor rates in Europe are back near record levels.

Credit default swaps (CDS) on Lehman debt have risen from around 130 in late April to 247, while Merrill debt has spiked to 196. Most analysts had thought the coast was clear for such broker dealers after the US Federal Reserve invoked an emergency clause in March to let them borrow directly from its lending window.

But there are now concerns that the Fed itself may be exhausting its $800bn (£399bn) stock of assets. It has swapped almost $300bn of 10-year Treasuries for questionable mortgage debt, and provided Term Auction Credit of $130bn.

“The steep rise in swap spreads this week is ominous,” said John Hussman, head of the Hussman Funds. “The deterioration is in stark contrast to what investors have come to hope since March.”

Lehman Brothers took writedowns of just $200m on its $6.5bn portfolio of sub-prime debt in the first quarter even though a quarter of the securities had “junk” ratings, typically worth a fraction of face value.

Willem Sels, a credit analyst at Dresdner Kleinwort, said the banks are beginning to face waves of defaults on credit cards, car loans, and now corporate loans. “We believe we’re entering Phase II. The liquidity crisis has eased a little, but the real credit losses are accelerating. The worst is yet to come,” he said.

Read moreUS and European debt markets flash new warning signals

South America considers common currency

BRASILIA: South America is thinking of creating a common currency and a central bank along the lines of those in the European Union’s eurozone, Brazilian President Luiz Inacio Lula da Silva said yesterday.

The idea is a logical next step following the signing last Friday of a treaty creating a Union of South American States that aims to promote joint regional customs and defense policies, Lula said during his weekly radio broadcast.

“Many things still haven’t been realised. We are now going to create a Bank of South America. We are going to move forward so in the future we’ll have a single central bank, a common currency,” he said.

But, he added: “This is a process. It won’t be something that happens quickly.”
Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela all signed up to the Unasur treaty creating the regional union during a ceremony in Brasilia last Friday.

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Weimar Inflation in America

“Instead, take those steps necessary to protect yourself and your family to prepare for the dollar’s inflationary collapse. Buy gold. Buy silver. Avoid the US dollar.” – James Turk
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Probably almost everyone is familiar with the hyperinflationary episode that engulfed Germany after the First World War. That nation’s economy was crippled by monetary problems that resulted in dreadful personal hardships, even though up to that time Germany had achieved one of the highest living standards in the world.

The newly formed German government, named for the city where their constitution was drafted after the Kaiser’s abdication in 1918, kept pumping up the money supply. The process started relatively slowly, but quickly the pace of money creation accelerated.

The Weimar government was paying its bills on credit – just like Zimbabwe is now doing. The Weimar government was issuing currency in exchange for valuable goods and services that it was receiving, and the vendors of those goods and services accepted the newly issued currency in the expectation that they would be able to exchange it for goods and services of like value. However, they soon realized that they were deluding themselves. Prices were rising rapidly, with the consequence that a flight from the currency into commodities and other tangibles began.

There was no discipline on the creation of new currency, with the result that it was being issued to excess. Within a few short years, the German government eventually destroyed the Reichsmark, the currency it had been issuing, making the words Weimar Germany synonymous with hyperinflation, economic collapse, deprivation and personal hardship. All the wealth saved in Reichsmarks was wiped out.

For example, in his classic book, “Paper Money”, penned three decades ago under the pen name of Adam Smith, George J.W. Goodman recounts the story of Walter Levy, an internationally known German-born oil consultant in New York. Levy told him: “My father was a lawyer, and he had taken out an insurance policy in 1903. Every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread.”

The following photo is from an insightful book by Bernd Widdig entitled “Culture and Inflation in Weimar Germany”. This photo shows one way in which people coped with rising prices.

As the inflation worsened, people sold whatever they could to survive. Widdig succinctly describes it in the caption to the above photo as follows: “The impoverished middle class has to sell its cherished possessions.”He should have correctly stated though that it was the “newly impoverished middle class”. They only became destitute after the inflation had destroyed their savings and ability to maintain their standard of living.

Sadly, the problems of Weimar Germany are now appearing in the US. To survive the impact of rising prices, Americans today – like Germans did eight decades ago – are selling cherished possessions, as explained in a recent story by Associated Press entitled “Americans unload prized belongings to make ends meet”. The full article is available at the following link: http://abcnews.go.com/Business/Economy/story?id=4750846&page=1

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Prime Minister Gordon Brown warns of global oil ‘shock’

Related video: The Energy Non-Crisis by Lindsay Williams

British Prime Minister Gordon Brown warned Wednesday that the world faced an era-defining oil “shock” that required urgent action, as European leaders struggled to contain growing protests over soaring fuel prices.

“It is now understood that a global shock on this scale requires global solutions,” Brown wrote in The Guardian newspaper.

Record oil prices of around 135 dollars a barrel have contributed to protests worldwide over the rise in fuel and food costs, with fishermen and truck drivers taking the lead in Europe, blocking ports and road access to oil depots.

“However much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy,” Brown said, adding that the problem should be made a “top priority” at the EU summit next month and the gathering of G8 leaders in July.

“The way we confront these issues will define our era,” he said.

Brown’s warning came a day after French President Nicolas Sarkozy urged a Europe-wide cut in consumer taxes on fuel and Portugal’s economy minister Manuel Pinho called on the Slovenian head of the European Union to hold an urgent debate on the crisis.

Read morePrime Minister Gordon Brown warns of global oil ‘shock’

Ford to Cut Up to 12% of Salaried Jobs

Ford Motor plans to cut its U.S. salaried work force by up to 12 percent after its turnaround plan stalled because of the downturn in the U.S. economy, the Detroit News reported Wednesday.

Ford warned last week it would not achieve its long-standing goal of returning to profitability in 2009 because of the U.S. economic downturn and a permanent shift in demand toward cars and crossovers and away from large trucks and SUVs.

The automaker also told employees in a memo last week that it expected to make cuts in hourly and salaried employees by Aug. 1 and would detail those steps in July.

Read moreFord to Cut Up to 12% of Salaried Jobs

Congress Is Clueless On The Oil Issue

Related video: The Energy Non-Crisis by Lindsay Williams

The U.S. Congress continues to show an incredible amount of ignorance on the oil issue. This week, the U.S. Senate held a hearing on the high price of oil and called out a group of oil company executives to testify. In addition, the U.S. House of Representatives approved a bill to sue OPEC over the high oil price. All of this grandstanding by our so called elected officials is going to do nothing to resolve the high oil price. This is a case of the U.S. Congress misdirecting the blame of the high oil price on OPEC and the major oil companies when they are really only minor players in this game. Threatening to sue OPEC is an incredibly stupid move because that could very well have the reverse effect and cause OPEC to respond to this threat by reducing the amount of oil they decide to pump. The two major reasons for the high oil price involve the Federal Reserve devaluing the U.S. Dollar through their monetary policies as well as the U.S. occupation of Iraq and Afghanistan. On top of this, it is clear that the Bush administration is looking for any excuse possible to bomb Iran. Israeli Prime Minister Ehud Olmert has even stated that a naval blockade of Iran is an option that should be put out on the table. With the devaluation of the U.S. Dollar and a potential expansion of war in an area where a tremendous amount of oil is drilled, it is no wonder why the oil price has skyrocketed as high as $135 a barrel. This makes the actions of the U.S. Congress entirely insane and intellectually bankrupt. Expect oil prices in the long term to move much higher.

Since oil is priced in U.S. Dollar denominated terms and the monetary unit of the U.S. Dollar continues to be devalued by the Federal Reserve’s ability to create as many U.S. Dollars as they like, it isn’t a real mystery as to why the oil price is so high. Instead of suing OPEC, the U.S. House of Representatives should be suing the Federal Reserve for fraud. The Coin Act of 1792 states that U.S. Mint employees who are caught debasing the nation’s coinage would be subject to the penalty of death. The Federal Reserve is engaging in the intentional debasement of the nation’s currency which is fundamentally no different and in fact worse than employees of the U.S. Mint debasing the nation’s coinage. Instead of debasing the physical coinage, bankers can simply type digits into a computer to devalue the nation’s currency. Maybe the death penalty should be explored for some of the central bankers that have engaged in these practices.

The U.S. Congress is also helping to contribute to the high oil price with their ridiculous policies. They have funded the illegal and unconstitutional occupation of Iraq and Afghanistan since 2003. The U.S. Senate just passed another war funding bill which will give the executive branch another $165 Billion to continue military operations in Iraq and Afghanistan. By continuing the military occupation of these countries it makes an attack on Iran all the more likely and contributes to greater uncertainty in the oil producing region.

General David Patreaus the current commander in Iraq is on the path to being confirmed as the new CENTCOM commander which means he will be in charge of all U.S. military operations in the Middle East. Assuming he gets confirmed, the chances of a strike on Iran will be all the more likely. Admiral William Fallon the former CENTCOM commander resigned from the position due to the perception that he was refusing to play ball with the Bush administration’s agenda on Iran.

Read moreCongress Is Clueless On The Oil Issue

At stake is no less than control of the world’s food supply.

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U.S. using food crisis to boost bio-engineered crops

From Seeds of Suicide to Seeds of Hope: Navdanya’s Intervention to Stop Farmers’ Suicides in Vidharbha

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Heather Meek leafs through the seed catalogue she wrote on the family computer, on winter nights after the kids went to bed.

There are Kahnawake Mohawk beans and Painted Mountain corn; Tante Alice cucumber and 40 varieties of heritage tomatoes.

Selling seeds is more than just an extra source of income on this organic farm an hour northwest of Montreal.

For Meek and partner Frederic Sauriol, propagating local varieties is part of a David and Goliath struggle by small farmers against big seed companies.

At stake, they believe, is no less than control of the world’s food supply.

Since the dawn of civilization, farmers have saved seeds from the harvest and replanted them the following year.

But makers of genetically modified (GM) seeds — introduced in 1996 and now grown by some 70,000 Canadian farmers, according to Monsanto, the world’s largest seed company — have been putting a stop to that practice.

The 12 million farmers worldwide who will plant GM seeds this year sign contracts agreeing not to save or replant seeds. That means they must buy new seeds every year.

Critics charge such contracts confer almost unlimited power over farmers’ lives to multinational companies whose priority is profit. They say GM seeds are sowing a humanitarian and ecological disaster.

But Trish Jordan, a Canadian spokesman for Monsanto, explains that requiring farmers to sign “technology use agreements” allows companies to recoup the cost of developing products.

“Farmers choose these products because of benefits they provide,” Jordan says. “That’s why we’re successful as a company.”

The debate over GM seeds has come into sharp focus as the world faces a food-price crisis that threatens to push millions into starvation.

Read moreAt stake is no less than control of the world’s food supply.