The day all pretentions of a "Strong Dollar" policy died...
G-7 meetings are often major catalysts for the gold
and commodity markets.
In May 2006, the G-7, and the Bank of Japan orchestrated
the most dramatic collapse of a major monetary base in
modern history — slashing monetary reserves by 20 trillion
yen (roughly $175 billion) collapsing a speculative run
up in oil, gold, and commodities.
And again last August, the BOJ orchestrated yet another
shakeout of the Yen-carry trade, once again collapsing
gold and gold stocks.
Both times, the gold stock newsletter, and punditry
community completely missed the trade.
And just two weeks ago, at the Feb. 8th & 9th, G-7
meeting - the gold community missed yet another
major trading catalyst.
And here's what they missed:
-- Platinum +17% and NEW ALL TIME HIGH
-- OIL +13% and NEW ALL TIME HIGH
-- CRB Index +9% and NEW ALL TIME HIGH
-- MOO Agri-Biz ETF +15% and NEW ALL TIME HIGH
-- DBA (Wheat, Corn, Soybean, Sugar)ETF +11% and NEW ALL TIME HIGH
-- Gold +3.3% and NEW ALL TIME HIGH (even with possible IMF sales)
So what caused commodities to move virtually en-masse to
new all time highs - directly into a slowing global economy?
It wasn't what the G-7 talked about - inflation, the
subprime credit crisis, derivatives, and the slowing
global economy.
Instead, it was what they "didn't" talk about.
A presentation was removed from the agenda. A presentation
by Bernanke & Paulsen on the U.S.'s continued strong Dollar
policy.
It was removed from the agenda.
...as was any and all remaining pretentions that the
U.S. has a "strong Dollar" policy.
Remember the interview that Larry Kudlow did with
V.Pres. Dick Cheney?
Message 24009107
And how curious was it that Warren Buffett's now infamous
misquote about "The U.S. Dollar becoming worthless
(worth less)" occured the day before the G-7 meeting?
...just a bit of a shot accross the Bernanke bow.
And concerning the debate over inflation vs. deflation...
I call this the "Larry Kudlow vs. Rick Santelli" debate.
...theory vs. reality.
Well here's reality...
A simple reality chart worth a thousand theoretical words:
Gold is money, and inflation is always and everywhere,
a monetary phenomena
In just the last quarter - gold is up between +16-20%
against the major global currencies.
Now tell me about that deflation theory one more time?
Everyone wants to talk about US money supply. They want
to debate whether MZM, M1, M2, or reconstructed M3 is the
correct measure of monetary growth.
Wrong question, especially when 18 of the 20 largest central banks are inflating money supply at double digit rates.
And it's monetary policy of 12-18 months ago that has
created the present environment anyway. Fed rate cuts
and fiscal policy take 12-18 months to work their way
through the economy.
If the above two charts didn't answer your questions
about inflation vs. deflation... maybe these will:
M1
M2
Discontinued M3
MZM
I know, I know... some of you want to talk about rate of change, and year over year comparisons.
Again... 18 of 20 Central Banks are inflating money
supply at double digit rates... it's not all about
the U.S.... and the bigger question about the U.S.
is not what it's been doing the last 6 months - but,
what it will be doing in the next 6 months...
And as far as the next shoe to drop?
What seems to be the keyword in these Fed comments?
09/28/2007 -- Fed’s Lockhart: Inflation Expectations Remain Anchored
10/09/2007 -- Fed’s Poole: Inflation Expectations Remain Well Anchored
11/05/2007 -- Fed’s Mishkin: Inflation Expectations Remain Well Anchored
11/16/2007 -- Fed’s Kroszner: Inflation Expectations Reasonably Well Anchored
01/10/2008 -- Fed’s Bernanke: Inflation Expectations Reasonably Anchored
01/11/2008 -- Fed’s Mishkin: Inflation Expectations Reasonably Anchored
02/07/2008 -- ECB’s Trichet: Successful in Anchoring Inflation Expectations
02/07/2008 -- Fed’s Yellen: Must Ensure Inflation Expectations Stay Anchored
02/19/2008 -- Fed’s Stern: Inflation Expectations Well Anchored at Low Levels
02/20/2008 -- FOMC: Inflation Expectations Edged Higher But Still Anchored
...inflationary expectations.
If you want to see what they look like - take another
look at those first two charts above.
Now, it's time to pick your ponies and place your bets:
-- Kudlow vs. Santelli
-- Theory vs. Reality
-- Goldilocks vs. The Big Bad Wolf
-- Rose Colored Glasses - vs. Night Vision Goggles
-- Deflation vs. Inflation
-- Fiat vs. Gold
Mo later,
S.O.T.B. |
