Tags: Inflation

Thoughts from GoldBroker.com – Is This the Calm Before the Storm?

In case you haven’t noticed, Goldbroker.com has been a Liberty Blitzkrieg partner for several months now. If you care about the precious metals market, then you should know about them. Not only do they deal in the metals, but their site provides some excellent commentary on the market. Such as the latest by Dan Popescu titled, The Calm Before the Storm in the Gold Market.

Here are some excerpts:

Again this week the gold price tested the $1,200 level dropping below it on higher US dollar against most fiat currencies. It is assumed that a stronger US dollar against the euro and other fiat currencies is also negative for the price of gold. However gold is not a hedge against the US dollar but rather against all fiat currencies. Even though gold’s price has been falling, in India and China gold premiums have increased signifying a rising demand. We have also seen a substantial increase in silver and gold coin sales in the US. Actually gold coin sales doubled in September compared to August.

With sentiment at historic low as I explained in my previous article Gold Sentiment, $1,200 and more specifically $1,180 is more a correction within a secular bull market than a pause in a larger bear market. With more and more articles coming out with titles like “Gold Dies”, I am more convinced than ever that we are seeing a major bottom being crated. Eastern central banks are still buying massively and Western central banks are holding on to their stock. This doesn’t look to me as a continuation of a downtrend.

On November 30, Swiss citizens will go to the polls to vote on three areas; whether or not the Swiss National Bank should increase its gold reserves to 20%, that the central bank should stop selling its gold and that all its gold should be held within the country. If by any chance the Swiss people votes in favor I expect major tremors in the gold market. Just the fact that Switzerland will have to buy a large amount of gold to reach the 20% will have a major psychological effect on the gold market not to mention also the snowball effect it will have on other countries. Switzerland is a very small country but with a long history of gold ownership. A vote in favor in the Swiss Gold Initiative referendum would mean that Switzerland would have to buy 1,700 tonnes of gold. This represents 70% of annual world gold production. The Swiss National Bank has 5 years to acquire the 1,700 tons if the initiative passes.

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Bernanke’s Not Wasting Any Time – Earns $250,000+ for a Speech in Abu Dhabi

Ben Bernanke isn’t wasting any time cashing in on what might be the greatest transfer of wealth in history from 99.9% of the world’s population to a handful of connected oligarchs and their political minions. Cronyism does indeed pay well, even if bureaucrats have to wait until they leave office to collect.

The Bernank isn’t wasting any time ringing the register.

From Reuters:

Former Federal Reserve Chairman Ben Bernanke said the U.S. central bank could have done more to fight the country’s financial crisis and that he struggled to find the right way to communicate with markets.

“We could have done some things on the margin to mitigate somewhat the crisis,” Bernanke, 60, said on Tuesday in his first public speaking engagement since he stepped down in January after eight years heading the Fed.

“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”

“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.

Um, so you thought it was? Never forget that these are the clowns running the show.

Bernanke said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want” – and in remarks to over 1,000 bankers and financial professionals in the capital of the United Arab Emirates, he made clear that he had regrets.

Bernanke received at least $250,000 for his appearance at the financial conference staged by National Bank of Abu Dhabi NBAD.AD, the UAE’s largest bank, according to sources familiar the matter. NBAD did not announce the fee.

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Beef Supply at 21-Year Low: Get Ready to Pay Up

I don’t follow the commodity markets as closely as I used to, but the following article related to beef prices really caught my eye. Last year’s drought and consequent spike in grain prices led to negative margins for cattle producers, who subsequently culled their herds. As expected, this has resulted in tighter supply today. We see this evidenced in the fact that retail ground beef prices were up 13% year-over-year in June, and the CEO of Ruth’s Chris mentioned during a recent presentation that they were forced to raise prices in February. While grain prices are much lower today, which should encourage expansion in cattle supply, this process will actually cause even more tightness in the near-term as more animals are set aside for breeding rather than slaughtered.

Don’t worry, you can always just eat the S&P 500.  From Bloomberg:

U.S. beef production is plunging to a 21-year low after surging feed costs spurred ranchers to cut herds, signaling record prices for consumers and higher costs for buyers from McDonald’s Corp. to Ruth’s Chris Steak House.

Production in the U.S. will decline 4.9 percent to 10.93 million metric tons in 2014, retreating for a fourth year, the government says. The herd on July 1 was the smallest for that date since at least 1973, according to the average of four analyst estimates compiled by Bloomberg.

Retail ground-beef prices in June were up 13 percent from a year earlier and near a record set in January.

Beef costs for Ruth’s Hospitality Group Inc., the Heathrow, Florida-based steakhouse owner, climbed 17 percent over two years, Chief Financial Officer Arne Haak said during a presentation on June 25. The restaurant raised its prices in February. Next year and 2015 will still be tough because of the lack of supply, Chief Executive Officer Michael O’Donnell said in a presentation June 18.

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Pakistan Bans Gold Imports for 30 Days

The latest buzz circulating around the gold market relates to news that Pakistan’s Economic Coordination Committee of the Cabinet (ECC) has decided to ban duty free gold imports for thirty days. Why you ask? Because those pesky Indians are using Pakistan as a conduit to get around the country’s recent 8% duty imposed on gold imports.

All of this of course begs the question: With the price of gold “plunging” over the past several months, why did Pakistan and India both feel the need to take such draconian measures against a barbarous relic that everyone is supposedly panic selling? If there is so much gold to be had and no one wants it, what’s the problem? Strange indeed. From the The Express Tribune:

The Economic Coordination Committee of the Cabinet, headed by Finance Minister Ishaq Dar, took the decision to ban the import of the yellow metal for one month with immediate effect.

During a meeting with Dar in Karachi last week, the Exchange Companies Association of Pakistan (ECAP) had claimed that smuggling of gold to India was causing rupee devaluation, as the importers were mopping up dollars from the market to meet the needs of the Indian buyers.

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Rasmussen: 81% of Americans are Paying More for Groceries

What?!  Someone get the Bernanke on the line ASAP!  Apparently the remaining 19% of Americans work at TBTF banks and the Federal Reserve.  From Rasmussen:

Most adults continue to say they are paying more for groceries than they were a year ago, and they expect that amount to be even higher next year.

A new Rasmussen Reports national telephone survey finds that 81% of American Adults are paying more for groceries than they were a year ago, down from 86% in March but generally in line with previous findings. Just 12% say their grocery bills are no higher than they were last year. 

It’s interesting that even after adjusting for fake tuna and horse meat, prices are still climbing.  These Americans are clearly conspiracy theorists (if you want to know whether you are one or not click here), everyone knows there is no inflation and that Oceania has always been at war with Eastasia.

Full story here.

In Liberty,
Mike

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The Latest Victim of Inflation: Subway’s “Footlong” Sub

In what has now become a series of posts on how people in the western world are being shortchanged by stealth inflation, we now find out that: “four out of seven Footlongs — purchased at Subway locations in Manhattan, Brooklyn and Queens — measured only 11 or 11.5 inches.”

Subway

Not to worry.  The stock market is near all time highs and the politburo’s statistics agencies continue to ensure us that there is no inflation.  From the New York Post:

Stingy Subway sandwich honchos are shorting customers by serving 11-inch “Footlong” subs, hungry New Yorkers say.

Four out of seven Footlongs — purchased at Subway locations in Manhattan, Brooklyn and Queens — measured only 11 or 11.5 inches, according to the test.

And that’s not the only corner Subway is cutting — the shops have sliced their cold-cut sizes by 25 percent in the past few months, a Manhattan franchise owner told The Post.

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R.I.P. Retirement: 28% of Americans are Raiding Their 401k Plans

This trend has been in place since the financial crisis, but the fact that it is accelerating is extremely disconcerting.  First off, this is not the kind of behavior that should be witnessed in an “economic recovery.”  Second, we need to remember the huge percentage of Americans on food stamps and/or disability.  As I have discussed previously, many of them also have jobs.  So essentially, a wage and a check from the government is still not enough to survive.  They still need to tap into a loan from their 401k plans.

From the Washington Post:

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

A report due out this week from the financial advisory firm HelloWallet found that more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills. Those in their 40s have been the most likely culprits — one-third are turning to such accounts for relief.

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Inflation Rocks the UK as Beer Gets Watered Down

These types of stories are popping up with increased frequency throughout the western world.  Products are simply declining in quality, and in many cases these declines are being accompanied by price increases.  Remember my article from a week ago Inflation Hits Coffee as Brewers Secretly Swap Robusta for Arabica.  This is more or less the same story, except this time in the UK and centered around beer.  From CNBC:

Britain’s favorite pint of bitter is being watered down as austerity continues to bite and taxes rise.

John Smith’s Extra Smooth, billed as “no nonsense beer”, is being reduced from 3.8 percent alcohol to 3.6 percent in response to rising costs and reduced beer consumption.

Heineken, which is also raising the cost of the famous bitter by about 2.5 pence a pint, said it was bringing John Smith’s “in line with competitor smooth ales that already sit at or below this alcoholic strength”, including its biggest rival, Carlsberg’s Tetley Smoothflow.

Now here is my favorite line:

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Inflation Hits Coffee as Brewers Secretly Swap Robusta for Arabica

This article hit close to home for me.  Literally.  It was just over the holiday season that I mentioned to my mom that her coffee doesn’t taste as good as it used to.  She insisted that she was buying the same blend as always and I insisted it didn’t taste as good.  The conversation ended there.

Then I came across the following article and everything started to make sense.  From the Daily Finance:

Reuters is reporting that many of America’s major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they’re now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee.

Research out of agricultural bank Rabobank confirms that demand for Arabica beans among coffee buyers “has fallen 27% year-to-date, while Robusta [demand] is 25% higher.” This seems to confirm a widespread alteration of the bean mix.

Why the switcheroo? Prepare to not be shocked. The answer is: price.

Now here’s the kicker of the article.

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Obama Wins 8 of the Nation’s 10 Wealthiest Counties…Impressive Stats for a “Socialist”

I just love these statistics posted by CNBC yesterday:

In an election that often focused on debates about class warfare, President Barack Obama was favored over multimillionaire businessman Mitt Romney in eight of the nation’s 10 wealthiest counties.

For a guy that supposedly wants to redistribute wealth, the wealthiest people sure do seem to like him.  The sad truth of the matter is that Obama is doing one simple thing.  He is paying off the poor via food stamps and disability checks so that they stay in line while the oligarchs steal everything in sight.  The middle class is squeezed in the process and is rapidly disappearing.  So in a way he is a wealth distributor, just not in the way the pundits would have you believe.  He is funneling the wealth or the middle class and non-oligarch rich to the super rich oligarchs.  The poor just get paid off to shut-up as usual.  I am once again reminded of Keynes’ famous quote:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but at confidence in the equity of the existing distribution of wealth.

So there we have it.  Obama the socialist? No. Obama the crony capitalist coddler?  Most definitely.

Read the CNBC article here.

In Liberty,
Mike