Inflation

Global free market for food and energy faces biggest threat in decades

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The global free market for food and energy is facing its biggest threat in decades as a host of countries push through draconian measures to hold down prices, raising fears of a new “resource nationalism” that could endanger world food security.


Somali’s demonstrate against high food prices in the capital Mogadishu. At least two people were killed in clashes

India shocked the markets yesterday by suspending trading in futures contracts for a range of farm products in a bid to clamp down on alleged speculators and curb inflation, now running at 7.6pc.

The country’s Forward Markets Commission said contracts for soybean oil, chana (chickpeas), potatoes, and rubber had been banned for four months, even though a report by the Indian parliament last month concluded that soaring food costs had almost nothing to do with the futures contracts. Traders in Mumbai slammed the ban as an act of brazen political populism.

The move has been seen as a concession to India’s Communist MPs – key allies of premier Manmohan Singh – who want a full-fledged ban on futures trading in sugar, cooking oil, and grains.

As food and fuel riots spread across the world, a string of governments have resorted to steps that menace the free flow of food and key commodities. Argentina has banned beef exports, while Egypt and India have stopped shipments of rice.

Kazakhstan has prohibited wheat exports. Russia has slapped a 40pc export duty on shipments, and Pakistan a 35pc duty.

China, Cambodia, Malaysia, Philipines, Sri Lanka, and Vietnam have all imposed export controls or forms of rationing to ease the crisis.

UN Secretary-General Ban Ki-moon has warned that this lurch towards national controls is becoming a threat to the open global system we all take for granted. “If not handled properly, this crisis could result in a cascade of others and affect political security around the world,” he said.

A new report by UBS says the scramble for scarce raw materials is turning ever more political, with ominous implications for ill-endowed societies that rely on imports.

“The bottom line is that countries with resources, particularly in food and energy are becoming more protective of these resources,” it said.

(I know I am repeating myself and I know that many are already well prepared. This is for the ones that are not:
Store food and water “NOW”. Do this in a relaxed manner because your brain shuts down when you are under stress and in survival mode. – The Infinite Unknown)

Read moreGlobal free market for food and energy faces biggest threat in decades

Buying Opportunity For Gold And Silver

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The international banking cartel during the past month has managed to push the price of gold down to the $850 – $880 level and silver down to the $16 – $17 level. The manipulation of the gold and silver market is incredibly obvious just by looking at daily charts of the gold and silver prices. Quite frequently you’ll see a nose dive in the price of both gold and silver without any sort of rationale behind the price swing. Also consider the fact that the price of oil is around $120 barrel which means that gold is incredibly undervalued relative to the oil price.

Even a 10 to 1 gold to oil ratio is low from a historical perspective and as we speak, gold is well under that ratio. Gold at the $850 – $880 level is a tremendous buying opportunity. The corporate controlled media is telling us that the commodity bull is over and the U.S. Dollar is stabilizing. Therefore it is prudent to do the opposite of what they are advocating. Anyone saying that the U.S. Dollar has stabilized is living in fantasy land. The Federal Reserve recently cut interest rates another 25 basis points and they continue talking about creating more money out of thin air to bailout banks that are on the brink of collapse. The U.S. Dollar is heading further down the toilet unless there is a dramatic reversal in monetary policy and that doesn’t look as if it will happen anytime soon.

(Buying Gold and Silver may save your life, when the economy crashes. But you can’t eat it.
Thats why you have to store lots of food and water as well. – The Infinite Unknown)

Read moreBuying Opportunity For Gold And Silver

Emptying the Breadbasket

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For decades, wheat was king on the Great Plains and prices were low everywhere. Those days are over.

At Stephen Fleishman’s busy Bethesda shop, the era of the 95-cent bagel is coming to an end.

Breaking the dollar barrier “scares me,” said the Bronx-born owner of Bethesda Bagels. But with 100-pound bags of North Dakota flour now above $50 — more than double what they were a few months ago — he sees no alternative to a hefty increase in the price of his signature product, a bagel made by hand in the back of the store.

“I’ve never seen anything like this in 20 years,” he said. “It’s a nightmare.”

Fleishman and his customers are hardly alone. Across America, turmoil in the world wheat markets has sent prices of bread, pasta, noodles, pizza, pastry and bagels skittering upward, bringing protests from consumers.

But underlying this food inflation are changes that are transforming U.S. agriculture and making a return to the long era of cheap wheat products doubtful at best.

Half a continent away, in the North Dakota country that grows the high-quality wheats used in Fleishman’s bagels, many farmers are cutting back on growing wheat in favor of more profitable, less disease-prone corn and soybeans for ethanol refineries and Asian consumers.

“Wheat was king once,” said David Braaten, whose Norwegian immigrant grandparents built their Kindred, N.D., farm around wheat a century ago. “Now I just don’t want to grow it. It’s not a consistent crop.”

In the 1980s, more than half the farm’s acres were wheat. This year only one in 10 will be, and 40 percent will go to soybeans. Braaten and other farmers are considering investing in a $180 million plant to turn the beans into animal feed and cooking oil, both now in strong demand in China. And to stress his hopes for ethanol, his business card shows a sketch of a fuel pump.

Read moreEmptying the Breadbasket

Federal Reserve may Want Inflation

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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.

Read moreFederal Reserve may Want Inflation

U.S. risks stagflation, says BIS chief

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BASEL, Switzerland, April 29 (Reuters) – Stagflation is an increasingly plausible prospect in the United States and weak economic growth could last well into 2009, if not longer, the head of the Bank for International Settlements says.

That does not herald a rerun of the economic stagnation and rampant inflation that ran riot during the 1970s when oil prices last soared to unprecedented levels, Malcolm Knight, BIS general manager, said in an interview.

But it does cast some doubt on the White House’s thesis that the economy will rebound in the second half of 2008 in response to the tens of billions of dollars of tax rebates the government will be delivering to U.S. households in the coming weeks.

“I see a certain amount of scope for stagflation in a number of economies and that usually tends to result in subpar economic growth performance for an extended period of time, which could go well into 2009 or even longer,” said Knight, a Canadian who worked for more than 20 years at the International Monetary Fund.

“I think the U.S. economy is likely to experience weakness this year and in much of 2009,” said Knight, speaking to Reuters at BIS headquarters in Basel, Switzerland.

“Stagflation is a definite risk.”

Read moreU.S. risks stagflation, says BIS chief

Food Riots and Speculators

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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.

Read moreFood Riots and Speculators

Hyperinflationary Depression

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Until now, I have given equal credence to two possible scenarios:

  1. We could have several years of inflation as we do now, and the powers-that-be would have a sudden rush of brains to the head, like Paul Volcker and Ronald Reagan did in 1980, and stop the “printing press,” ending inflation and the gold and silver bull market, for at least a few years; or
  2. It is too late to stop it. The political forces and the Unfunded Liabilities would prevent the powers-that-be from ending the money-printing process, and in fact, would grossly accelerate it. This would result in a hyper inflation (400 percent inflation or more), and the eventual total destruction of the dollar. Suddenly America would find its money totally useless. Store shelves would be empty, gas would go through the stratosphere, and Americans would suffer through the greatest threat since the Great Depression of the ’30s.

So what caused me to settle on number two?

I received John Williams’ recent newsletter “Shadow Government Statistics,” www.shadowstats.com in which he describes his case for a hyper-inflationary depression. It was most persuasive. It certainly persuaded me, and is consistent with what I’ve said for years.

I spent the ’70s fending off the media label of “Prophet of Doom,” arguing that I expected much less than doom. It turned out to be so.

With my new book in circulation, I’ll face the same accusations, and this time they are right. The financial world we know and love is facing genuine doom. You could lose the value of all your assets in the stock market. You could find yourself unable to buy essential commodities, when you want them, and gold and silver will be valued, not in the tens or hundreds of dollars per ounce, but in the thousands!

John Williams’ Shadow Government Statistics newsletter is most unusual. John is a consulting economist with all of the academic credentials. Most of his clients are bank officers and high-ranking corporate officers. He has rearranged the government data according to historical analysis.

For example, the government says inflation is under four percent by the simple expedient of eliminating energy and food from their calculations. John says inflation is over 11 percent, including energy and food.

His academic credentials are way ahead of mine, but at least I know enough to understand his work. It’s my job to try to reduce such things to terms my subscribers can grasp.

Here are some brief paragraphs from this 25-page report.

“With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.”

Read moreHyperinflationary Depression

The REAL cost of inflation

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The Daily Mail’s Cost of Living Index reveals food prices rising at SIX times official figure

The true, devastating scale of rising prices is revealed today – by the new Daily Mail Cost of Living Index.

It shows that families are having to find more than £100 a month extra this year to cope with increases in the cost of food, heat, light and transport.

According to the Consumer Price Index, inflation is running at only 2.5 per cent.

Yet the Mail’s index finds that food costs alone are rising at 15.5 per cent a year – more than six times the official rate.

And there are double-digit increases in other “must-pay” essentials such as petrol, gas and electricity.

Many families need to find more than £1,200 extra a year just to stand still.

Once higher mortgage costs are added, millions are having to pay out at least another £2,000 a year to keep their heads above water.

The Bank of England’s chief economist Charlie Bean admitted last night that higher food and energy costs are likely to push the Consumer Price Index over 3 per cent this year.

Read moreThe REAL cost of inflation

A Trillion Dollar Rescue for Wall Street Gamblers

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Nothing for Families and Retirees

If the move to a Unitary Executive of unfettered presidential power frightens you, America’s radical right turn to Unitary Finance should compound your fears–and your debts as well. The financial events of the last two weeks of March 2008 demonstrate that the “economic royalists” and “money changers” whom Franklin Delano Roosevelt (FDR) drove from the temple of finance have returned to mismanage our economy into dire straights of unprecedented risk–debt creation, euphemized as “leveraging” and “wealth creation.”

The few checks and balances that remain in the way of the financial sector’s increasingly centralized planning, especially at the state level, are being swept aside under the guise of “saving the system.” Few Wall Street beneficiaries who use this phrase explain just what the system is. For starters, its political managers are industry lobbies appointed to high managerial and planning positions in the public agencies that are supposed to regulate these industries. Their idea of financial planning is to put a trillion dollars in government agency funds and credit guarantees at risk. This agency funding was supposed to be used to help average American families obtain housing and health care, and to protect their savings and provide for their retirement. Instead, it is being mobilized to support the economy’s bankers and financial managers. Indeed, the past few weeks have seen seemingly trillions of dollars committed for war making and bank support.

The banking system’s free creation of credit, doubling each five years or so for the economy at large, threatens to culminate in debt peonage for many American families and also for industry and for state and local governments. The economic surplus is being quickly absorbed by a combination of debt service and government bailouts for creditors whose Ponzi schemes are collapsing right and left, from residential to commercial real estate and corporate takeover loans to foreign bubble-economy credit.

This is the context in which to view the past few weeks’ financial turmoil surrounding Bear Stearns, JPMorgan/Chase and the rapidly changing debt landscape. “The system” that the Treasury, Federal Reserve and the New Deal agencies captured by the Bush Administration is trying to save is an economy-wide Ponzi scheme. By that I mean that the business plan is for creditors to lend debtors enough money for them to pay the interest costs so as to keep current on their loans.

Super Imperialism – New Edition: The Origin and Fundamentals of U.S. World Dominance

Read moreA Trillion Dollar Rescue for Wall Street Gamblers

Inflation hits consumers worldwide

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(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.

Read moreInflation hits consumers worldwide

Not-So-Quiet Food Riots

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The big problem with inflation is that people get low blood sugar when they are hungry, and soon their moods turn sour. I know this for a fact because if breakfast or brunch or lunch or coffee break or dinner or any snack is five minutes late, I involuntarily turn into a screaming monster from hell demanding to know who stole my food and vowing bloody revenge. I can only imagine the anger when hunger is caused because someone can’t afford to buy food!

This “inability to buy food” is one of the problems with inflation, and that ugliness is now here, as we read from Bloomberg.com that “The World Bank in Washington says 33 nations from Mexico to Yemen may face ‘social unrest’ after food and energy costs increased for six straight years.” Hahaha! No kidding?

World Bank chief Robert Zoellick says, “Thirty-three countries around the world face potential social unrest because of the acute hike in food and energy prices”, and that since 2005, “the prices of staples have jumped 80%”.

Like what? Like corn and wheat, which are making the news by rising like crazy, and the latest food emergency is that “Rice, the staple food for half the world,” is now double the price of a year ago, and a fivefold increase from 2001. Yikes!

100% inflation in the price of rice in one year! And 500% in seven years! Yikes again! No wonder that Jody Clarke at MoneyWeek.com reports that “Since January 2005 the average price of a loaf of bread in the US has risen 32%. Overall, US retail food prices rose 4 % last year, the biggest jump in 17 years, says the US Department of Agriculture. Meanwhile restaurant owners have been even harder hit, with wholesale price increases of 7.4%. That’s the biggest jump in nearly three decades, according to the National Restaurant Association.”

And worse yet for us alcohol-besotted worthless lushes out here, heroically keeping bartenders and comely barmaids gainfully employed year around, the price of hops, an integral ingredient in beer making, has soared from $4 a pound to $40.

The Marketbasket Survey, conducted by the American Farm Bureau Federation, says a basket of things like bread, milk, eggs and pork chops will cost you $3.50, or 8.9%, more this year than last. Both a five-pound bag of flour and a dozen eggs are up over 40% since January 2007.“

Read moreNot-So-Quiet Food Riots

A Weekend to Start Fixing the World

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As Finance Ministers Convene Here, Multiple Crises Test Their Ability to Cope

Financial markets are tumbling. The world economy is starting to sputter. Food prices have shot up so far, so fast, that there are riots in the streets of many poor nations.

It’s a hard time to be one of the masters of the global economy.

Those leaders — finance ministers from all over the world — are gathering in Washington this weekend to sort out their reactions to the most profound global economic crises in at least a decade. The situation could reveal the limitations that international economic institutions face in dealing with the risks inherent to global capitalism.

“There’s got to be something coming out of the weekend, a way to visibly assume public responsibility for trying to limit the damage that financial markets can do to our society,” said Colin Bradford, a senior fellow at the Brookings Institution. “The pressure is on politicians this weekend to come up with an answer. . . . What is the power structure going to do about this?”

The Group of Seven finance ministers of major industrialized countries meet today, and the governing boards of the International Monetary Fund and World Bank will meet tomorrow and Sunday. Their agendas: in the case of the G-7 and IMF, countering the breakdown in financial markets; in the case of the World Bank, food inflation that threatens to drive more of the world’s poorest people into starvation.

Read moreA Weekend to Start Fixing the World

Haiti’s government falls after food riots

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PORT-AU-PRINCE (Reuters) – Haiti’s government fell on Saturday when senators fired the prime minister after more than a week of riots over food prices, ignoring a plan presented by the president to slash the cost of rice.

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Sixteen of 17 senators at a special session voted against Prime Minister Jacques Edouard Alexis, an ally President Rene Preval placed at the head of a coalition cabinet in June 2006 that was meant to unite the fractious Caribbean nation.

Read moreHaiti’s government falls after food riots

IMPORT PRICES STILL SOARING

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Today’s update on import prices once again paints a troubling picture on pricing pressures.

Import prices jumped 2.8% last month, the U.S. Labor Department reports. That’s the highest since last December’s unnerving 3.2% spike. More troubling is the fact that the 2.8% rise in March is in the upper range for monthly changes going back to the 1980s. Adding insult to injury, import prices soared 14.8% measured over the 12 months through last month, as our chart below shows. That’s the highest 12-month rate in the Labor Department’s archives, which goes back to 1982 as per the web site.

The “good news,” if we can call it that, is that much of the rise in import prices was due to higher energy costs. And energy prices can’t rise forever–we hope. In any case, the 14.8% surge in import prices over the past year falls to 5.4% after stripping out energy. But the lesser rise in non-petroleum import prices is hollow comfort once you recognize that the 5.4% annual pace is the highest since the 1980s. The basic trend, in short, is not in doubt, no matter how you slice the import-price pie.

How troubling is a 5.4% rise in non-petroleum imports? In search of an answer, consider that inflation generally in the U.S. is climbing by 4.0%, based on the annual rise in consumer prices through February. And the nominal (pre-inflation adjusted) annualized pace of economic expansion in 2007’s fourth quarter was 3.0%. In other words:

* non-petroleum import prices are advancing at a roughly 33% faster rate than general inflation
* non-petroleum import prices are rising 80% faster than the nominal growth of GDP

Read moreIMPORT PRICES STILL SOARING

Fed: Severe Downturn Possible

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WASHINGTON (Reuters) – Members of the Federal Reserve’s policy-setting committee worried at their most recent meeting that housing and financial market stress could trigger a nasty slide in the economy, even as inflation pushed higher, minutes of the meeting released on Tuesday show.

“Some believed that a prolonged and severe economic downturn could not be ruled out given the further restriction of credit availability and ongoing weakness in the housing market,” minutes of the March 18 meeting said.

Fed economists presented a somber picture of short-term prospects — central bank staff now fully expect negative growth over the first six months of the year — but held out the possibility of a modest rebound later.

“The staff projection showed a contraction of real GDP in the first half of 2008 followed by a slow rise in the second half,” the report said, referring to gross domestic product, a broad measure of a country’s output of goods and services.

At the same time, Fed officials found recent inflation reports “disappointing,” noting also with concern that some indicators of inflation expectations were edging higher.

Read moreFed: Severe Downturn Possible

Feed the world? We are fighting a losing battle, UN admits

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Huge budget deficit means millions more face starvation.

Ears of wheat growing in a field. Photograph: Steve Satushek/Getty images

The United Nations warned yesterday that it no longer has enough money to keep global malnutrition at bay this year in the face of a dramatic upward surge in world commodity prices, which have created a “new face of hunger”.

Read moreFeed the world? We are fighting a losing battle, UN admits

Food riots fear after rice price hits a high

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Shortages of the staple crop of half the world’s people could bring unrest across Asia and Africa, reports foreign affairs editor Peter Beaumont

A global rice shortage that has seen prices of one of the world’s most important staple foods increase by 50 per cent in the past two weeks alone is triggering an international crisis, with countries banning export and threatening serious punishment for hoarders.

With rice stocks at their lowest for 30 years, prices of the grain rose more than 10 per cent on Friday to record highs and are expected to soar further in the coming months. Already China, India, Egypt, Vietnam and Cambodia have imposed tariffs or export bans, as it has become clear that world production of rice this year will decline in real terms by 3.5 per cent. The impact will be felt most keenly by the world’s poorest populations, who have become increasingly dependent on the crop as the prices of other grains have become too costly.

Read moreFood riots fear after rice price hits a high

Bernanke Warns of Possible Recession

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WASHINGTON (AP) – Federal Reserve Chairman Ben Bernanke said Wednesday a recession is possible and policymakers are “fighting against the wind” in trying to steady a shaky economy. He would not say if further interest rate cuts are planned.

Bernanke’s testimony before the Joint Economic Committee of Congress was a more pessimistic assessment of the economy’s immediate prospects than a report he delivered earlier this year. His appearance on Capitol Hill came amid a trio of economic slumps in the housing, credit and financial areas.

“It now appears likely that gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke told lawmakers. GDP measures the value of all goods and services produced within the United States and is the best barometer of the United States’ economic health. Under one rule, six straight months of declining GDP, would constitute a recession.


Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington,
Wednesday, April 2, 2008, before the Joint Economic Committee.
(AP Photos/Susan Walsh)

Read moreBernanke Warns of Possible Recession

The Subprime Crisis is Just Starting

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(Excerpt: “For these reasons, there is a powerful, powerful case for moving a substantial portion of your assets into tangible assets. Good examples of tangible assets include gold, silver, commodities, real estate, farmland and energy.”)

Financial Sense

by Daniel R. Amerman, CFA | March 20, 2008

Print

Overview

As the author of three books on mortgage finance and related derivative securities, and speaking as someone who first turned mortgages into rated securities in 1983, I’m going to let you in on an unfortunate little secret – the real subprime mortgage securitization crisis may not have even started yet. But, there is a good chance the real crisis will arrive soon.

This assertion that the crisis could just be getting started may seem absurd and extraordinarily out of touch. What about the approximately 45,000 homeowners losing their homes to foreclosure in the United States every month? What about the 8.9% plunge in nominal housing prices in 2007, the largest decline in over 20 years? What about Bear Stearns losing 94% of the value of its stock in 2 days, with even the remaining 6% in value being based on an unprecedented loan from the Fed before JP Morgan would agree to the acquisition? How much worse could it get?

Read moreThe Subprime Crisis is Just Starting

Germans Fear Meltdown of Financial System

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Germany and other industrialized nations are desperately trying to brace themselves against the threat of a collapse of the global financial system. The crisis has now taken its toll on the German economy, where the weak dollar is putting jobs in jeopardy and the credit crunch is paralyzing many businesses.

trader1.jpgA trader reacts in front of the DAX board at the Frankfurt stock exchange.

The Bundesbank, Germany’s central bank, doesn’t like to see its employees working too late, and it expects even senior staff members to be headed home by 8 p.m. On weekends, employees seeking to escape the confines of their own homes are required to sign in at the front desk and are accompanied to their own desks by a security guard. Sensitive documents are kept in safes in many offices, and a portion of Germany’s gold reserves is stored behind meter-thick, reinforced concrete walls in the basement of a nearby building. In this environment, working overtime is considered a security risk.But the ordinary working day has been in disarray in recent weeks at the Bundesbank headquarters building, a gray, concrete box in Frankfurt’s Ginnheim neighborhood, where the crisis on international financial markets has many employees working late, even on weekends.

Read moreGermans Fear Meltdown of Financial System

Americans fear harder times

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Public’s feelings about economy are bleakest since ’73, survey indicates Americans are bracing for rising unemployment and shrinking salaries, a gloomy outlook that could translate into a serious cutback in consumer spending, the primary engine of the economy.

A survey of about 2,500 households found that Americans feel worse about the economy’s prospects than at any time since 1973, when Americans struggled with soaring oil prices and runaway inflation.

Read moreAmericans fear harder times

Foreign investors veto Fed rescue

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As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its rescue measures.

Asian, Mid East and European investors stood aside at last week’s auction of 10-year US Treasury notes. “It was a disaster,” said Ray Attrill from 4castweb. “We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed.”

dollar.jpg

Read moreForeign investors veto Fed rescue

Gulf central banks urged to sever links with tumbling US dollar

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Pressure is mounting on central banks in the Gulf to fight surging inflation when they meet on Wednesday by severing the link between their currencies and the tumbling US dollar.Officials in Qatar and the United Arab Emirates have denied rumours of an imminent decoupling, but investors are betting on reform and are rushing to buy local currencies as investment banks issue fresh calls for revaluation.

Read moreGulf central banks urged to sever links with tumbling US dollar