Federal Reserve may Want Inflation

We are now importing inflation. This does not only apply to the cost of commodities, such as oil, but also to consumer goods imported from Asia. This is a newer trend as, in our analysis, Asia had been exporting deflation until the summer of 2006; since then, we have seen increased pricing power by Asian exporters.

Inflation is not just a U.S. phenomenon; as Asian economies are far more dependent on agricultural and industrial commodities, rising inflation may become a serious concern in the region. The stronger and more prudent Asian central banks may realize that allowing their currencies to float higher versus the U.S. dollar may be the most effective way to combat inflationary pressures.

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Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin

April 28 (Bloomberg) — As farmers confront mounting costs and riots erupt from Haiti to Egypt over food, Garry Niemeyer is paying the price for Wall Street’s speculation in grain markets.

Commodity-index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures, equal to half the amount held in U.S. silos on March 1. The holdings jumped 29 percent in the past year as investors bought grain contracts seeking better returns than stocks or bonds. The buying sent crop prices and volatility to records and boosted the cost for growers and processors to manage risk.

Niemeyer, who farms 2,200 acres in Auburn, Illinois, won’t use futures to protect the value of the crop he will harvest in October. With corn at $5.9075 a bushel, up from $3.88 last year, he says the contracts are too costly and risky. Investors want corn so much that last month they paid 55 cents a bushel more than grain handlers, the biggest premium since 1999.

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Gasoline May Soon Cost $10 a Gallon.

Big New Shock at the Pump Forecast by Two Analysts

Get ready for another economic shock of major proportions — a virtual doubling of prices at the gas pump to as much as $10 a gallon.

That’s the message from a couple of analytical energy industry trackers, both of whom, based on the surging oil prices, see considerably more pain at the pump than most drivers realize.

Gasoline nationally is in an accelerated upswing, having jumped to $3.58 a gallon from $3.50 in just the past week. In some parts of the country, including New York City and the West Coast, gas is already sporting a price tag above $4 a gallon. There was a pray-in at a Chevron station in San Francisco on Friday led by a minister asking God for cheaper gas, and an Arco gas station in San Mateo, Calif., has already raised its price to a sky-high $4.62.

Read moreGasoline May Soon Cost $10 a Gallon.

Food Riots and Speculators

Food riots have broken out across the globe destabilizing large parts of the developing world. China is experiencing double-digit inflation. Indonesia, Vietnam and India have imposed controls over rice exports. Wheat, corn and soy beans are at record highs and threatening to go higher still. Commodities are up across the board. The World Food Program is warning of widespread famine if the West doesn’t provide emergency humanitarian relief. The situation is dire. Venezuelan President Hugo Chavez summed it up like this, “It is a massacre of the world’s poor. The problem is not the production of food. It is the economic, social and political model of the world. The capitalist model is in crisis.”

Right on, Hugo. There is no shortage of food (This is disinformation – The Infinite Unknown); it’s just the prices that are making food unaffordable. Bernanke’s “weak dollar” policy has ignited a wave of speculation in commodities which is pushing prices into the stratosphere. The UN is calling the global food crisis a “silent tsunami”, but its more like a flood; the world is awash in increasingly worthless dollars that are making food and raw materials more expensive. Foreign central banks and investors presently hold $6 trillion in dollars and dollar-backed assets, so when the dollar starts to slide, the pain radiates through entire economies. This is especially true in countries where the currency is pegged to the dollar. That’s why most of the Gulf States are experiencing runaway inflation.

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Japan’s Hunger Becomes a Dire Warning for Other Nations

MARIKO Watanabe admits she could have chosen a better time to take up baking. This week, when the Tokyo housewife visited her local Ito-Yokado supermarket to buy butter to make a cake, she found the shelves bare.

“I went to another supermarket, and then another, and there was no butter at those either. Everywhere I went there were notices saying Japan has run out of butter. I couldn’t believe it – this is the first time in my life I’ve wanted to try baking cakes and I can’t get any butter,” said the frustrated cook.

Japan’s acute butter shortage, which has confounded bakeries, restaurants and now families across the country, is the latest unforeseen result of the global agricultural commodities crisis.

A sharp increase in the cost of imported cattle feed and a decline in milk imports, both of which are typically provided in large part by Australia, have prevented dairy farmers from keeping pace with demand.

While soaring food prices have triggered rioting among the starving millions of the third world, in wealthy Japan they have forced a pampered population to contemplate the shocking possibility of a long-term – perhaps permanent – reduction in the quality and quantity of its food.

A 130% rise in the global cost of wheat in the past year, caused partly by surging demand from China and India and a huge injection of speculative funds into wheat futures, has forced the Government to hit flour millers with three rounds of stiff mark-ups. The latest – a 30% increase this month – has given rise to speculation that Japan, which relies on imports for 90% of its annual wheat consumption, is no longer on the brink of a food crisis, but has fallen off the cliff.

According to one government poll, 80% of Japanese are frightened about what the future holds for their food supply.

Last week, as the prices of wheat and barley continued their relentless climb, the Japanese Government discovered it had exhausted its ¥230 billion ($A2.37 billion) budget for the grains with two months remaining. It was forced to call on an emergency ¥55 billion reserve to ensure it could continue feeding the nation.

“This was the first time the Government has had to take such drastic action since the war,” said Akio Shibata, an expert on food imports, who warned the Agriculture Ministry two years ago that Japan would have to cut back drastically on its sophisticated diet if it did not become more self-sufficient.In the wake of the decision this week by Kazakhstan, the world’s fifth biggest wheat exporter, to join Russia, Ukraine and Argentina in stopping exports to satisfy domestic demand, the situation in Japan is expected to worsen.

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Credit Crisis Turning into Credit Armageddon

While most investors are focused on the latest stock market rally, hidden from view is a monumental change that few recognize and fewer understand: Unprecedented amounts of old debts are coming due in America, and many are not getting refinanced.

Even worse, borrowers are going into default, lenders are taking huge losses, and outstanding loans are turning to dust.

The numbers are large; the government’s response is equally massive. So before you look at one more stock quote or any other news item, I think it behooves you to understand what this means and what to do about it …

New Evidence of A Credit Crack-Up

Until recently, economists have had only anecdotal evidence of credit troubles.

They knew that individual banks were taking losses. They knew that many banks were tightening their lending standards. And they realized that there were hiccups in the credit markets.

So they called it the “credit crunch” — essentially a slowdown in the pace of new credit growth.

But we didn’t buy that. Earlier this year, we warned that America’s credit woes involved much more than just a slowdown. We wrote that it was actually a credit crack-up — an outright contraction of credit the likes of which had never been witnessed in our lifetime.

Wall Street scoffed. No one had seen anything like this happen before, and almost everyone assumed that it would not happen now.

They were wrong.

Indeed, three new official reports are now telling us, point blank, that the credit crack-up is already beginning!

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The Collapsing Dollar – Authorities lose patience

Jean-Claude Juncker, the EU’s ‘Mr Euro’, has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.


Jean-Claude Juncker, who is calling for Washington to
take steps to halt the slide of the dollar

Momentum traders have blithely ignored last week’s accord by the G7 powers, which described “sharp fluctuations in major currencies” as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.

“I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting,” he said.

Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising “protectionism” in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar.

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Bailing Out Banks – Congressman Ron Paul

There has been a lot of talk in the news recently about the Federal Reserve and the actions it has taken over the past few months. Many media pundits have been bending over backwards to praise the Fed for supposedly restoring stability to the market. This interpretation of the Fed’s actions couldn’t be further from the truth.

The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications of market trouble began back in August of 2007, instead of holding back and allowing bad decision-makers to suffer the consequences of their actions, the Federal Reserve took aggressive, inflationary action to ensure that large Wall Street firms would not lose money. It began by lowering the discount rates, the rates of interest charged to banks who borrow directly from the Fed, and lengthening the terms of such loans. This eliminated much of the stigma from discount window borrowing and enabled troubled banks to come to the Fed directly for funding, pay only a slightly higher interest rate but also secure these loans for a period longer than just overnight.

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Inflation hits consumers worldwide

(AXcess News) – Gas pumps in the United States tell the same story as rice prices in Thailand: Inflation is a global phenomenon this year.

Oil hit a record $112 per barrel this week, and a United Nations official warned of continued pressure on food prices, which by one index are up 45 percent in the past year.

The challenges are worst in developing nations, where raw materials account for a larger share of consumer spending. But another factor – the sagging value of the US dollar – means that imports cost more in America and other nations that peg their currencies to the dollar.

Still, regardless of this currency phenomenon, several broad forces are pushing prices up.

After years of strong global economic growth, prices of oil, grains, and some metals have spiked. Investors are adding fuel to that fire by buying up hard assets like commodities, which are viewed as a hedge against inflation.

More fundamentally, many nations have been relatively loose in the creation of money supply. For all the news about interest-rate cuts by the Federal Reserve, this trend goes well beyond US shores.

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Philippines threatens rice hoarders with life imprisonment

Filipinos face life in prison if they’re caught hoarding rice.

“The Department of Justice is preparing economic sabotage or plunder charges that carry a life sentence against traders found to be hoarding rice, the price of which has risen sharply amid a tight global supply,” The Inquirer reports. “Although the country has yet to experience a shortage, Justice Secretary Raul Gonzalez Thursday vowed to hale to court hoarders and other unscrupulous rice traders for acts ‘inimical to the public interest.'”

President Gloria Macapagal-Arroyo reiterated the warnings during a speech today, but also pledged to increase imports of the staple.

“Those who seek to take advantage of our people must be stopped,” she says, according to The Inquirer. “I am leading the charge to crack down on any form of corruption by public or private officials who would divert supplies or pervert the price of this essential commodity in any way.”

“Anyone caught stealing rice from the people will be thrown in jail,” she adds.

Bloomberg News
reports that the price of rice, a key staple in the global food supply, keeps hitting record highs. It’s now twice as expensive as it was at this time in 2007.

“We’re in for a tough time,” Roland Jansen, CEO of Mother Earth Investments AG, tells the financial news service, adding: “you will have huge problems of daily nutrition for half the planet.”

(Photo of workers in Manila taken March 28 by Romeo Ranoco, Reuters.)

Source: USA Today