June 27, 2008 by david.pennington.

By Ambrose Evans-Pritchard
The Telegraph, London
Friday, June 27, 2008

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarc…

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero.”

“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.

The grim verdict on Ben Bernanke’s Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank’s dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of “anti-dollar” and as a market reproach to Washington’s easy-money policies.

The Fed’s stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2 to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. “Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s,” he said.

“They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box.”

Barclays Capital recommends outright “short” positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to “steepen” with a vengeance, causing a bloodbath for bondholders.

David Woo, the bank’s currency chief, said the Fed’s policy of benign neglect toward the dollar had been stymied by oil, which is now eating deep into the country’s standard of living. “The world has changed all of a sudden. The market is going to push the Fed into a tightening stance,” he said.

The bank said the full damage from the global banking crisis would take another year to unfold. Rob McAdie, Barclays’ credit strategist, said: “The core issues have not been addressed. We’re still in a very large deleveraging cycle and we’re seeing losses continue to mount. We think smaller banks will struggle to raise capital. We’re very bearish — in the long-term — on high-yield debt. The default rate will reach 8 to 9pc next year.”

He said investors had taken their eye off the slow-motion disaster engulfing the US bond insurers or “monolines.” Together these firms guarantee $170 billion of structured credit and $1,000 billion of US municipal bonds.

The two leaders — MBIA and Ambac — have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. “The creditworthiness of many US financial institutions will decline in coming months,” he said.

The bank warned that engineering and auto firms we’re likely to face a crunch as steel and oil costs surge. “Their business models will have to be substantially altered if they are going to survive,” said Mr McAdie.

A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Societe Generale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.

Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a “totemism that threatens to crush the world economy.”

He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.

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June 9, 2008 by david.pennington.

by Michael Pennington

1.       Price of Oil – In October 1998 one barrel of oil sold for $10.72. This past Friday saw the price oil increase by more than the total 1998 price – up over $11 per barrel. This rising trend will not end in the near future. There are billions of new middle class populations demanding more energy every day. Virtually everything we buy today is affected by higher oil prices. As oil goes up prices everywhere, food, chemicals, plastics, transportations and commodities are driven higher and will fuel new inflationary era. Nothing can destroy investments like inflation; not recessions, not depressions, not even crashing stock markets. Inflation is the deadliest force in the economic environment and it is just beginning to show it’s ugly face. Protect yourself with gold and silver bullion.

2.       Collapse of our Biggest Banks – Every day we hear about the difficulties with the shrinking capital of the banks. What you need to remember is that the banks brought this on their own heads. The FED has only made matters worse by providing a very accommodative approach to fixing their problems. This morning Lehman Brothers posted a $3 Billion loss and have filed for a $6 billion new stock offering. The losses at Washington Mutual, Wachovia and others will be just as big and the bloodletting is not close to being over. Most of these banks are insolvent at this very moment. Some will be allowed to fail while the FED (the taxpayers) will bail out others who are managed by their “friends”. I assume none of you own stock in any of these financial institutions, but if you do please sell while you can. The only medicine that can fix our banking problems is to provide them enough gold to help bring them out of their capital crunch. Instead the FED illegally continues to “lend” these banks huge dollars and they themselves continue to try to sell more shares to an ill-informed public. This looks like a house of cards built on paper. Paper burns or is easily shredded.

3.       Jawboning is the strategy of the Day – You know they are desperate when Ben Bernanke last week started “selling” the idea that the US dollar is strong. This is almost unprecedented as the Treasury Secretary not the FED is responsible for speaking on behalf of the dollar. Please don’t believe the media who are always trying to convince the investing public that all is well. They claim there is little or no inflation, the housing problem is over, the credit catastrophe has already been accounted for, and the stock market will resume it’s bull market any day now. The Powers to Be control all the media and they will attempt to have you believe their ideas, not what actually is happening in the market. Do not be fooled.

4.       Price of Other Commodities – The prices of all commodities are poised to soar. Demand exceeds supply in copper, steel, corn, wheat, natural gas etc. etc. In fact, demand is growing exponentially while their supply continues to shrink. The “environmentalists” continue to make mining, drilling, farming etc. more difficult. As a result fewer resources are available for use.This dichotomy will drive the price of all these commodities to heights not believed possible. If you want to be bull, here’s the opportunity. The CRB commodity Index has doubled in the past seven years. It has grown by 400% more than Microsoft during that same timeframe. You need to be in hard assets…and quickly.

5.       Market Intervention – The only certainty in today’s markets is that they are being constantly manipulated to support the FED and the politicians of the day. These interventions are used to make the greedy elites richer and to camoflauge their criminal illegalities. The normal course of events see the price of gold and silver manipulated down. The Stock markets are being controlled by the ESF. The main problem with all this intervention is that once you start intervene there is no turning back. It’s like telling a lie. Once you lie, you’re required to continue the lie. For those who favor intervention and believe it’s the job of the FED to manipulate I say you’ll get what you deserve. This is because we have to rely on the Powers-to-Be to be properly motivated. They may not be. Just as the U.S. has been suckered into wars for the benefit on the PTB, the day may come when they want the economy to collapse, and on that day it will.

6.       The Future of the US Dollar – Color me skeptical when I hear the talking heads say the economy is in great shape, and the worst is behind us. Yet, it’s only been a matter of weeks now since we were informed the financial system was near collapse when the Bear Stearns bailout was required. I for one don’t believe problems that severe can be corrected and fixed in a  matter of weeks.  The City of Valleho, CA recently filed for bankruptcy. Like many other businesses, the problem is the high level of debt. This is not a liquidity crisis. It’s a solvency crisis. The average American credit card debt is over $6,000.  S&P Credit Chief, Diane Vazza revised her outlook to “Negative” for all financial institutions. The fundamentals for the dollar are extremely bleak. The FED continues to print dollars at an alarming rate. M3 is growing at 18% per year, while our CPI is estimated to be ranging near 12% per year according to showstats.com. Our weak dollar forces China and the Middle East to import our inflation. Our trade deficit is now $700 billion. The dollar is going to go down and silver and gold are going to go up. By the end of the year Gold will be trading at $1,500 and Silver will be over $25.

7.       YOUR SAFETY DEPOSIT BOX IS NOT SAFE FROM THE GOVERNMENT – If you think your friendly bank is safeguarding your valuables in their safety deposit boxes, you might want to think again. All 50 states are becoming quite aggressive in seizing what they say is “unclaimed property”. The problem is that the property seized sometimes belongs to someone. A woman in San Francisco who lived six blocks from the bank had her safety deposit box opened and property removed. It took her 6 weeks to get the problem resolved, but let this little incident remind you that the government can request the bank at anytime to invade these security boxes and remove items that they demand. Find other places to store your precious metal investments.

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June 5, 2008 by david.pennington.

June 4, 2008

Open letter to:

Henry Paulson
US Secretary of The Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

It has come to my attention that 1oz US Silver Eagle coins are being rationed by the US Mint to 13 authorized dealers and not being made available to the public in adequate amounts.
http://www.silverinstitute.org/news/pr29may08.html

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+31USC5112

http://www.cftc.gov/newsroom/generalpressreleases/2008/pr5499-08.html

Cc:    Michael Mukasey, US Attorney General
        A. Roy Lavic, Inspector General CFTC
        Senator Dianne Feinstein
        Congressman Ron Paul

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