Oldtent Archives 2007 - 2008

Inflation, Not Deflation and Update of the 10 Year US Treasury Index
Posted on Fri, 27 Jun 2008 @ 07:55:26 PDT by David_Petch

We Have Inflation not Deflation

It is the end of the week and the start of a long weekend up here in the Great White North, so today’s commentary will be brief. Oil climbed overnight to peak at $141.71/barrel and this is likely not set to slow down yet until something breaks. Continue to stock up on dry goods such as rice, whole-wheat flour, powdered milk, brown sugar etc. because prices are going much higher. Many of the countries around the globe that have their currencies pegged to the US dollar have been forced to depreciate their dollar via interest rates and fiat expansion to keep at a preset level. This has caused prices to rise higher than anticipated. As mentioned earlier, monetary inflation often can remain dormant for some time and prices rise gradually. However, there is a tipping point by which commodity prices begin to rise as a result of monetary expansion, which directly pumps inflation right to people’s doorstep. I have written about this extensively, so simply review prior articles by title for more information. I am going to be updating stocks I own next week, probably due out on Wednesday AM.

Probably the biggest misconception out there on the web is the thought we are in a period of deflation. Inflation is defined as monetary expansion through issuance of fiat or credit. If anyone needs any proof, visit this link.

www.nowandfutures.com/key_stats.html#m3b

also the CRB Price Index

Periods of inflation will see a rising trend of interest rates to soon match the rate of inflation. The only way to quash inflation from a monetary perspective is to raise interest rates above…so if the true rate of inflation globally is around 12-15%, interest rates will be higher than these levels within 4-5 years. As analysis of the 10 Year US Treasury will point out, we are 5-7 months away from initiation of the an upward rising trend of rising interest rates.

Some people on the web think the US is experiencing deflation. Expansion of a given currency causes it to undergo weakness at some point and this trend has been intact with the USD since 2002. Major global economies are linked, so when a major currency such as the USD expands via issuance of credit or fiat paper, it becomes transferred globally into other assets. The US currently transfers 500 billion dollars/year to OPEC nations to drive vehicles, which is a direct transfer of money. At present, banks are not lending to each other, but credit card debt is being rapidly expanded to buy food and put gasoline in the tank. Much of this issued credit is finding its way into

But as the price of gasoline heads to $6 a gallon, $7 a gallon and $9 a gallon, nobody is going to want to hear about global warming and Bambi. And especially if they’re freezing in their homes in the middle of winter because remember a lot of homes on the east coast use heating oil; and our second hour interview with Michael Klare and his new book, he’s talking about the big surge in heating oil and they’re expecting heating oil prices to go even higher this winter. So you start seeing people freezing in the middle of the winter, or if they’re standing in line to get gas or eventually when we go to gas rationing in the next two years.

However, let’s get back to the facts here for a minute – last year energy consumption globally increased by 2.4% and that was the fifth consecutive year of growth in demand. As you might expect, Asia-Pacific accounted for two-thirds of that increase; Chinese energy consumption was up 7.7% last year; India’s energy consumption grew by 6.8%. Meanwhile, in the US and the EU consumption actually declined by 2.2% - most of that coming from Europe itself. [10:16]

JOHN: What this report highlights then is that the Asian demand, and demand elsewhere in the developing world, is actually offsetting the decline in the developed countries.

JIM: Yes, and as you talk to the experts, as we have limited capacity to increase supply and especially if you believe that conventional oil peaked in May of 2005, then the only way that you’re going to get this imbalance to reach equilibrium is for demand to fall dramatically in the United States and Europe, allowing for this increase in demand that we’re going to see in the rest of the world. And so demand right now – we’re down probably two or three hundred thousand barrels a day in demand here in the United States, but between the US and Europe and let’s say Japan – in the developed world – we’re going to need to see demand decline by roughly about four to five million barrels a day in the OECD to offset the similar increases that we’re seeing unfold in the developing world.

Right now, OECD oil output is falling. It has fallen for almost five consecutive years. Just as

all things being equal .which they are not . hypocrisy comes in different colors// all over the prices of stuff going up.. but it is fun to yell deflation in a crowded theater ,,, sold out at 12 bucks a ticket and 6 dollar popcorn …

report back when your personal cost start going down

sans house , sans pickups.. include food, medical, stamps, fares, milk, eggs, .. crying towels

opps

Yeah, it’s not just happening in the United States – and you get these reports every Wednesday and Thursday showing for example oil inventory going down or gasoline inventory going down. But it’s not just in the United States. If you take a look in the BP Review, total commercial oil stocks have been shrinking for the last three years. This gets back to something that we had in our energy roundtable at the beginning of the year: If you have demand of 87 million barrels and supply is only 85 million barrels, where is the difference coming between the two? The difference is coming from drawing down our inventory levels, which gets me back to the peak oil argument. It’s getting more prominent but they’re still not talking about it. But conventional oil production has been in decline since May of 2005, and it has declined every year since then. [13:44]

LIMA (Reuters) - Miners in Peru, the world’s leading silver producer and second-largest copper and zinc miner, were readying a strike for midnight on Sunday that will see walkouts at the country’s leading pits. Workers are expected to walk off the job at mines owned by Southern Copper (SPC.LM) (PCU.N), controlled by Grupo Mexico (GMEXICOB.MX), Freeport-McMoran’s (FCX.N) Cerro Verde, Buenaventura (BUEv.LM) (BVN.N), Canada’s Barrick Gold (ABX.TO), Shougang Hierro Peru (SHP.LM), zinc producer Volcan (VOL_pb.LM), tin producer Minsur (MINi.LM), Doe Run Peru, and others.

The Federation of Peruvian Mining Workers, Peru’s largest mining union, wants Congress to approve a law to eliminate limits on employee profit sharing so they can benefit more from sky-high metals prices.

Federation secretary general Luis Castillo said unions across the country had approved the strike.

“Most of the unions, some 47 by now, have sent in their statements of strike approval, which are being ratified and work stops definitively at 00:00 hours,” Castillo told Reuters by telephone on Sunday.

Similar strikes over the past year reduced output and boosted international metals prices.

Castillo said workers at the Casapalca and Morococha mines, the first producing zinc, lead and silver and the second producing silver and which are on the outskirts of Lima, planned to block highways as part of their protest.

Mineral exports from Peru, a leading global metals producer, have helped fuel a six-year economic boom, but mine workers say they are not getting a fair share of profits.

The federation delayed the start of its strike twice this year to give Congress more time to discuss a bill that would lift caps on profit-sharing in the industry.

“Nearly 90 percent of companies are involved in this because the profits bill will benefit more than 85,000 workers who contract services,” Castillo said.

The government of Peruvian President Alan Garcia has expressed support for the bill, but congressional leaders have not been able to reach a consensus.

“The government is supporting this bill,” Prime Minister Jorge del Castillo said on Saturday. “By order of the president I personally have been attending meetings of Congress on the issue.”

The unions are also asking the government to change rules for early retirement and give workers the right to enroll in state-run pension funds. They also want the workday reduced.

Another demand, a clampdown on outsourcing, was granted to workers last week.

Mining unions in Peru went on strike twice last year to put pressure on Congress to restrict non-union jobs in the sector and give workers a greater share of windfall profits.

Remember what JS was talking about … he’s allowed to talk about it (by whom?) … he was also talking about a hidden crowd which will save the system before it will break down … which has contracts with gold producing companies (to ensure to have enough of the gold) … his million bet … our enemies are in fact “our crowd” … there are a lot (more) of dots to connect.

1) http://xs228.xs.to/xs228/08260/g144d1_hui_27jun08_997.jpg
2) http://xs228.xs.to/xs228/08260/g144d2_hui_27jun08568.jpg

..

Just listened to congressional testimony on what to do to get oil prices down.The thought is its the speculators driving the price  especially the PENSION funds through their hedge fund operations.Well thats very interesting.It occurs to me they are rescuing the pension funds by high oil prices,its like a tax on the American people in order to bail out the pensions.Everybody buys oil if they drive or eat so everybody pays the tax.Now the political heat is getting to the politicians for the oil tax so another substitute will need to be found.They hold public hearings in order to look like they are going to do something to lower oil prices,when they behind the scenes they endorsed the plan as a tax to rescue pensions.Congress created the problem ,first by forcing banks to give mortgages to unqualified borrowers and lowering interest rates far below costs  .Then pensions funds that depended on high rates of return to fund their liabilities  went broke  buying phony mortgages from Goldman Sucks in packages that promised high rates of return and now they raised oil prices to rescue the Pensions funds .

Why don’t we pay the Congress to just stay home and stop this nonsense.

http://stockcharts.com/h-sc/ui?s=XLF&p=W&yr=3&mn=0&dy=0&id=p48069860705

Would Boone like to comment on this chart? Or would he simply be talking his book? Nah, Boone wouldn’t do that.

What I find hypocritical is so many inflationists are also Peak Oil proponents. So as oil gets more and more and more scarce according to you inflationists, pricing for everything is going to keep going up even though commerce is already rapidly falling worldwide due to the price of oil.

It is the most absurd inconsistency ever.

precious metals is still in place.  When a nation that is best known for selling a big chunk of its gold reserves at give-away prices is now the site of a gold mine re-opening suggests to me that there is something fundamentally important happening in this PM market. 

Of course, I have thought that since early 2002 but  still have nothing to be proud about or to brag about from our PM investments.  I guess I just dont know how to pick winners in the PM stocks.  But I do like the physical silver and gold we have accumulated since 2002.  So I think the concluding decision is to ‘hang in there’, because I did read on Goldtent somewhere that we are still in a PM bull market.  Cheers, all.  Equiz.

http://www.guardian.co.uk/business/2008/jun/29/mining1

JOHN: This brings us home to the point made by T. Boone Pickens when he responded to higher oil prices with a very, very simple answer, and here’s what he said – it’s very appropriate:

Well, it’s not speculators. Speculators have nothing to do with the price of oil. There’s 85 million barrels and the demand is greater than 85, so supply and demand are in very critical balance. And so you put a speculator in there, what can they do? They can’t do anything. You know. And they talk about the value of the dollar – get the value of the dollar up and it’ll make oil prices go down. That too is a myth.

Basically, the bottom line is that demand is greater than supply and prices will keep rising until demand and supply come back into balance.

www.financialsense.com/fsn/BP/2008/0621.html

hello moggy

You’re still glowin’, you’re still crowin’
You’re still goin’ strong
I feel the room swayin’
For the band’s playin’
One of my old fav’rite songs from ‘way back when
So, bridge that gap, fellas
Find me an empty lap, fellas
moggy will never go away again

But I want to chime in and say “Hi” and glad to see a post from you. Sounds like you are doing as well as can be expected in these trying times……sheeeesssh, if only these were the ‘trying times’!! I think we haven’t even started to see the devistation coming down the road. Best to you and hope you will see fit to post here on accasion. I know I am not the only one that would apreciate that.

Best
Dusty

Hi Moggy, glad to hear all is well with you, you are one special lady– I’ve missed you not posting here.

-> Posted by Farmboy @ 23:27 pm on June 28, 2008 Did a ‘Search’ for you boys tonight. Seems for the most part you are ‘MIA’. ?????Figure, you all have your reasons. But if time/circumstances allow, you need to check in. Ditto for Moggy. Ole Farmboy….who needs to know…hear, from a few of you.

Hello to you, Laddie…I rec’d the above in my email today…from a very dear friend that I was lucky enough to become acquainted with during my Tent passage.  So here I am, conjured up by your magic.  <g>  How the heck are you?  How goes plan A?  or is it B now?

Life has sure thrown a curve at the stock-holding goldbugs…and at most all other stockholders, it appears.  I certainly haven’t escaped the debacle, can only be glad that I hedged my bets and also bought the bullion.  Betcha I missed a lot of gnashing of teeth by not being around, eh?  Doesn’t faze me much, I’ve been broke three different times during my life…one time down to one thin dime, nothing in the bank, no savings anywhere.  That’s when the rubber meets the road as to faith…in God and in self.  Lots of testing going on and no one will escape when all is said and done.

I’ve been spending much of my time at a prepper site…we are actually survivalists but some folks don’t feel comfortable using such a term, it has gotten a bad name, you know.  It takes more than bullion to make a prepper…although some suppose all they need is gold coin and they can buy whatever…will never happen, though.  There is only one item that I would exchange for food and gold isn’t it.  But offer some propane when the fan has whirled a few times…then and only then would I make a trade.  Pretty much the same feeling among all the preppers.  So a rude awakening may be in store for some.

I’m in the process of doing another Vogel thingy… attempting to lure those preppers in north Georgia and west North Carolina to meet…see how we can form what needs forming before the sand runs through the timer…because it won’t be long now.

Best to you and all my friends at the Tent…and to those of you who aren’t…best to you, too.Moggy