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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (78984)	5/11/2008 5:26:15 PM
From: NOW	Respond to of 116555

A New Inflationary Epoch by Noland Crude oil closed today above $126. The most vitally important commodity in the world has now posted a stunning year-to-date rise of better than 30% and has now doubled in the past year. It is worth noting that during the ten-year period 1996 through 2005 crude averaged about $29 a barrel. It’s now at four times this level - and running. I don’t believe it is mere coincidence that crude has posted about a 30% y-t-d price surge at the same time as international reserve positions have expanded at about a 30% annualized rate - to a stunning $6.769 TN. Over the past 4 ½ years, official international reserves have ballooned an unprecedented $3.921 trillion, or 138%. During this period, crude prices surged almost 300%. Chinese reserves ballooned more than four-fold over this period to $1.68 Trillion; India’s reserve position tripled to $303bn; and Brazil enjoyed a four-fold increase to $189bn. After beginning 2004 at $73bn, Russian reserves have almost reached the half Trillion mark ($493bn). And in just the past year, OPEC reserves have inflated 42% to $490bn. To be sure, the world is awash like never before in excess “liquidity” for which to bid up prices of critical tradable resources. Especially since the Fed’s Credit System Bailout, anticipating Heightened Global Monetary Disorder has been a key CBB theme. The ongoing relevant question: how much would (in particular) China, India, Russia and Asia be willing to pay to procure adequate supplies of food and energy for their populations and economies? The obvious answer is “we have no way of knowing”, but the market is becoming increasingly cognizant of the reality that today’s massive international reserve positions provide virtually unlimited purchasing power. The bidding war has begun in earnest, in what increasingly appears A New Inflationary Epoch. The CRB Commodities index closed today at an all-time high, sporting a y-t-d gain of 19% and one-year rise of 37%. The Goldman Sachs Commodities index, also ending at a record high, has gained 28% so far this year and 68% over the past 12 months. During the past year, soybeans have gained 85%, corn 72%, and wheat 68%. Prices for iron ore, steel and hard commodities have experienced similar price inflation. Gasoline prices are up almost 40%, natural gas about 50%, and heating oil about 90% over the past year. A second important theme also emanated from the Fed’s and Administration’s desperate measures to sustain the U.S. Bubble economy: one upshot of this gambit would be stubborn Current Account Deficits and resulting ongoing growth in the increasingly destabilizing Global Pool of Speculative Finance. Not only do China, India, Russia, OPEC and others today enjoy ample reserves to bid up the price of global necessities, the leveraged speculator and sovereign wealth fund communities remain awash in financial resources that embolden huge speculative positions in various energy and commodities markets – essentially “front-running” real economy purchases. It’s turning into a battle royal – and a prime dynamic of A New Inflationary Epoch. prudentbear.com Your thoughts Mish? Your case for no inflation is getting pretty thin in the eyes of many