that most of these rises do occur more or less only if measured against the Dollar. Print the gold chart versus the Euro or the Yen and you will see that it changes much less.

And when we talk about inflation, it is critical to distinguish between inflation which comes from “real” demand for certain goods (commodities) caused by increased production within an economy (a lift up in the supply-demand equation basically), or, as we face now, an artificial demand caused by an increase in available money. Increased “Real demand” slowly distributes the inflationary effects to the ultimate buyer (in our case the American consumer) by wage rises caused by labour shortage which leads to wage competition among companies. So the overall purchasing power effect is ideally zero over time.

With pure monetary induced commodity price inflation (more money chases practically the same amount of commodities, hence the price must go up), the outcome may be even a loss in purchasing power of the consumer, as ordinary people usually do not buy oil futures but are subject to higher prices at the gas station, hence, consume less. Wasn’t the whole FED action designed to increase consumer spending?

Furthermore: as those parts of the world with a clear mind (basically Asia and BRIC)are observing that America goes the wrong way, they are happy to sell their overpriced treasuries into the hands of the greedy American “to big to fail” banks, which those finance with 0,25% FED credit to pocket the interest spread. Guess how these big banks can produce such nice results as recently published. and all that money finds its way into overpriced commodity markets (and they are overpriced by all standards if you consider “real economic demand” in this globally recessionary environment).

When you are a Chinese central banker having more than 2 trillion $ in your reserves, knowing that you could not count on American consumers to take off chinese factory production for a long time, wouldn’t it be prudent to sell off treasuries which pay a lousy interest rate and flip it over into commodities, which you could convert into product and either sell it in your home market or sell it oversees later?

Chinese central bankers must be loughing at Ben Bernanke, trying to bring light into a dark room by going outside with a bucket, holding it into the sunlight and then putting a cover on it, go back inside again and release the “captured” light into the dark room …

I would not be surprised if all that extra cash, which is infused with force into the US banking system, shows up one by one in international commodities markets and the US stock markets. The first means that those Americans which should carry the recovery will get poorer and thus will contribute to the deflationary force, and the second means that US assets are sold out to foreigners. and if you see it from the perspective of foreign currency, the price increase is much less spectacular, as most is being paid by the decreased exchange rate.

either way, America is bankrupt, and it seems Zimbabwe central banking is around the corner …

If I missed some rationale here, I’d be delighted to be educated. there is one question I would really like to ask Ben Bernanke if I’d had the chance to do so:

How, Mr. chairman, can you increase the purchasing power of the consumer, i.e. transfer wealth into his pocket?

That is what will “rule” the financial world to come…..

China has the population capacity to drown the world in consumer products (junk)….such “competitiveness” will bring third world status (like now, here) to much of the rest of the world.

As far as “bubbles” go, I believe the stock market is building a “trading” bubble; ie., attempting to “trade” their way out of the financial mess that has been created since the early ’90′s…….

Governments must do what the people cannot do for themselves, in this case protect them from the more horrible vagaries (brutalities) of the power of predatory capital. (Roaming the world scott free)

The dollar is now doomed as the “oil currency of first resort.”

That is the beginning of the end of the dollar. It will just be like a roll of toilet paper….

There can be no doubt that the removal of the dollar from reserve currency status has alot to do with it, however.

Budget surplus amounts of $5 billion in the fiscal year ended March 2008 is projected to fall to a deficit of about $7 billion for March 2010.

http://edmonton.ctv.ca/servlet/an/local/CTVNews/20080624/EDM_surplus_080624/20080624/?hub=EdmontonHome

In 2008 it would have been a higher surplus except for special spending initiatives.

A while ago the government announced no bonuses for government employees next Spring and a hiring freeze. Just today they annnounced a pay freeze for the next two years… and so it begins.

Alberta is heavily dependent on royalties from Natural Gas, but with low natural gas prices those have shriveled up to almost nothing.

BB