Federal Reserve losing control

[Ben D]

Yes SD, I agree it is scary stuff. I can't say that I know much about the technicalities, but I trust my intuition that the system is in seriously trouble.

If it weren't for the PPT, the future would already be upon us.
Overnight for instance, Starbucks announce the closure of 600 stores, a layoff of 12,000 employees, and bracing for the first decline in annual profit since 2000, and the shares jump 4.7% in, due to expert opinion that "the move should improve company's domestic profitability".

And GM shares rose 2% in late trade even though their US sales fell 18.5pc in June, due "better than expected" sales figures.

Anyway, I appreciate your interesting posts on the subject and those of isachar et al.

[vigilant]

Clearly the perps are trying to line their pockets as much as they can before Jan. 2009. I expect the levels of theft and profiteering to only increase.

I'm not so sure Jan. 2009 will rid us of the perps in question. Behind the scenes they may well remain in power regardless of who the talking head in the presidents chair is.....If Bush Sr's organization is even close to being as strong as it is reported to be, we won't be rid of it anytime soon.

[Brentos]

Yes SD, I agree it is scary stuff. I can't say that I know much about the technicalities, but I trust my intuition that the system is in seriously trouble.

If it weren't for the PPT, the future would already be upon us.
Overnight for instance, Starbucks announce the closure of 600 stores, a layoff of 12,000 employees, and bracing for the first decline in annual profit since 2000, and the shares jump 4.7% in, due to expert opinion that "the move should improve company's domestic profitability".

And GM shares rose 2% in late trade even though their US sales fell 18.5pc in June, due "better than expected" sales figures.

Anyway, I appreciate your interesting posts on the subject and those of isachar et al.

A good indicator of how much BS is involved in propping up consumer confidence in Wall Street and corporate shares is the DOW Jones index vs price of Gold (close enough to a real world commodity). In terms of real value, dollar valued shareholders are being raped, and it will get worse.

Don Harrold is worth checking out re: CNBC viewers: http://www.youtube.com/watch?v=wXVmHJPTzRA

[isachar]

A good indicator.... is the DOW Jones index vs price of Gold (close enough to a real world commodity). In terms of real value, dollar valued shareholders are being raped, and it will get worse.

Brentos, good point. Here's a link to a chart showing the ratio of the DOW to gold.

http://home.earthlink.net/~intelligentb ... dow-au.htm

[chiggerbit]

From a lurking friend:

As scenario planning goes, my best macro crystal ball gazing says this: Both oil and natural gas will continue to roar up at an astounding and disorienting pace. Come late August, or September, we will see near term peak prices. I’d guess in the $160 to $200/bbl range. Crappy harvest of corn in particular will send grain prices soaring, plus corn getting consumed as a biofuel. Post Olympic hangover and wild commodity prices will cause China to go into a hard recession and whack their demand for commodities. A pretty clear signal China is staggering in more than their growth rate is that their stock market is currently down 55% ytd. (!!!) Continued crappy times in US with credit crunch and housing price collapse will see its recession deepen. Excess liquidity being pumped out by the central banks will get soaked up in food purchases, and high prices for energy, and papering over the credit crunch. Discretionary purchases will plummet, leading to widespread unemployment. The Starbucks announcement yesterday is a latte taste of what’s coming, as are the collapsing auto sales. Worldwide, receding economies will cause demand for oil to drop pretty sharply and lead to a serious price correction of energy and metals. Perhaps this will be remembered as “the great crash of October ‘08”. LOL, wild market crackups and October seem to go hand in hand. The duration of the energy price correction will be relatively short; maybe a year (??) and production declines will make us hit a wall again and prices will rocket up again even if the economy is still in the dumps. If the central bankers and other uber-managers of the economy aren’t damned careful the whole mess could melt down in the process. I think they’ll sort it out and we won’t have to resort to cannibalism and Mad Max lifestyles to make a go of things, at least outside of Detroit. Just in case though, keep your Goth leathers and old hockey masks handy so you can make the appropriate fashion statement for the post apocalyptic world.

[bks]

chig (or anyone),

Enlighten an economic neanderthal: why would the price of metals 'correct' when oil demand falls? Oil prices would drop, I see that, but wouldn't the dollar have to strengthen to drop metal prices? Or is the argument that the dollar will automatically strengthen because oil demand decreases (given that oil is priced in dollars and there will be less of them to recirculate into the US financial sector)?

Or do I have it all fucked up?

[chiggerbit]

Me, I'm economically illiterate. By metals, do you mean copper, steel, and the like, bks? If oil prices drop, maybe shipping costs will also drop.

[chiggerbit]

Well, not only shipping costs would go down, but also extraction costs would go down. Even extracting oil gets more expensive when oil costs go up.

[vigilant]

One reason metal prices would drop if oil drops is because the production of metals is intimately linked to oil.

The harvesting of raw metal ores, turning ore into metal, and distribution of metal products all use petroleum in the process.

[slow_dazzle]

Merrill says GM bankruptcy 'not impossible'

If GM goes down that is a really big canary hitting the floor because of the size of the company and the support industries that service GM.

link

More bad news - This morning Taylor Wimpey, largest volume housebuilder in the UK, failed to raise several hundred £million leading to 900 professional and office jobs being shed. Their £1.9 billion of debt was downgraded from AAA investment value to junk status, as of yesterday. Another UK biggie in the volume market, Persimmon Homes, has stopped breaking ground on all new sites. UK housing construction starts are at their lowest level for 61 years.

Difficult to ignore the fact that what is playing out is what was predicted to play out, as we hit the energy plateau. Further to the energy issue, what vigilant said is significant, not only in the context of ore extraction and production, but for ANYTHING where energy is required for any part of the production process. And for "anything" read "everything".

Those of you who want to read up on how serious the energy situation is becoming might like to look up "Olduvai Gorge".

[bks]

chiggerbit,

I was referring to the last bit in this post offered by your lurking friend:

Both oil and natural gas will continue to roar up at an astounding and disorienting pace. Come late August, or September, we will see near term peak prices. I’d guess in the $160 to $200/bbl range. Crappy harvest of corn in particular will send grain prices soaring, plus corn getting consumed as a biofuel. Post Olympic hangover and wild commodity prices will cause China to go into a hard recession and whack their demand for commodities. A pretty clear signal China is staggering in more than their growth rate is that their stock market is currently down 55% ytd. (!!!) Continued crappy times in US with credit crunch and housing price collapse will see its recession deepen. Excess liquidity being pumped out by the central banks will get soaked up in food purchases, and high prices for energy, and papering over the credit crunch. Discretionary purchases will plummet, leading to widespread unemployment. The Starbucks announcement yesterday is a latte taste of what’s coming, as are the collapsing auto sales. Worldwide, receding economies will cause demand for oil to drop pretty sharply and lead to a serious price correction of energy and metals.

I figured that metals here meant the market price for gold, silver, etc, but I may have misunderstood.

[chiggerbit]

Emmm, I don't know.

[Brentos]

chiggerbit,

I was referring to the last bit in this post offered by your lurking friend:

Both oil and natural gas will continue to roar up at an astounding and disorienting pace. Come late August, or September, we will see near term peak prices. I’d guess in the $160 to $200/bbl range. Crappy harvest of corn in particular will send grain prices soaring, plus corn getting consumed as a biofuel. Post Olympic hangover and wild commodity prices will cause China to go into a hard recession and whack their demand for commodities. A pretty clear signal China is staggering in more than their growth rate is that their stock market is currently down 55% ytd. (!!!) Continued crappy times in US with credit crunch and housing price collapse will see its recession deepen. Excess liquidity being pumped out by the central banks will get soaked up in food purchases, and high prices for energy, and papering over the credit crunch. Discretionary purchases will plummet, leading to widespread unemployment. The Starbucks announcement yesterday is a latte taste of what’s coming, as are the collapsing auto sales. Worldwide, receding economies will cause demand for oil to drop pretty sharply and lead to a serious price correction of energy and metals.

I figured that metals here meant the market price for gold, silver, etc, but I may have misunderstood.

I think what this is trying to say is that the price of oil will go back down due to physical supply and demand means, where receding economies demand less, so price does down. This lowers the cost of mining metals as previously stated. But it doesn't address the inflationary aspect of why gold & oil is so high vs the dollar & dow jones index. So Im not sure what the poster means by a correction in metals? Possibly that metals will go up in value due to a supposed decrease in oil, since paper money will no longer be safe in oil.

EDIT: Cheers for the link isachar. gold price/DJ index ratios are a great measure of inflation in the stock market.

[isachar]

From a lurking friend:

As scenario planning goes, my best macro crystal ball gazing says this: Both oil and natural gas will continue to roar up at an astounding and disorienting pace. Come late August, or September, we will see near term peak prices. I’d guess in the $160 to $200/bbl range. Crappy harvest of corn in particular will send grain prices soaring, plus corn getting consumed as a biofuel. Post Olympic hangover and wild commodity prices will cause China to go into a hard recession and whack their demand for commodities. A pretty clear signal China is staggering in more than their growth rate is that their stock market is currently down 55% ytd. (!!!) Continued crappy times in US with credit crunch and housing price collapse will see its recession deepen. Excess liquidity being pumped out by the central banks will get soaked up in food purchases, and high prices for energy, and papering over the credit crunch. Discretionary purchases will plummet, leading to widespread unemployment. The Starbucks announcement yesterday is a latte taste of what’s coming, as are the collapsing auto sales. Worldwide, receding economies will cause demand for oil to drop pretty sharply and lead to a serious price correction of energy and metals. Perhaps this will be remembered as “the great crash of October ‘08”. LOL, wild market crackups and October seem to go hand in hand. The duration of the energy price correction will be relatively short; maybe a year (??) and production declines will make us hit a wall again and prices will rocket up again even if the economy is still in the dumps. If the central bankers and other uber-managers of the economy aren’t damned careful the whole mess could melt down in the process. I think they’ll sort it out and we won’t have to resort to cannibalism and Mad Max lifestyles to make a go of things, at least outside of Detroit. Just in case though, keep your Goth leathers and old hockey masks handy so you can make the appropriate fashion statement for the post apocalyptic world.

Chig, I think he's got it about as accurate as anyone can from this perspective. Probably will be some retracement in metals as demand for oil/energy plunges since these two are positively linked. Retracement will last only until the world is flooded by even more dollars from the Fed printing presses and electronic bits offered to banks, et.al., to keep them afloat.

2008, is looking to be the new 1927.

No one can get any prognostication like this exactly right. Bound to be zigs, zags along the way and unknown factors/events. Just knowing the general trend is sufficient.

[smiths]

one of the things that will happen is that production of metals will shift to the places where the fuel is cheap,

aluminium for instance requires bauxite which is currently cheap and huge amounts of power,
the chines have bauxite but pay increasing amounts for the power,
now the gulf states are building aluminium smelters because they have the cheap power but they dont have the bauxite,
so the cost of that goes up

but metals costs and precious metals prices are different things

if the dollar hadnt been purposely trashed thenn gold, silver and platinum would be worth a fraction of what they currently are,
but iron ore would still be worth a fortune because the increasing battle for all commodoties would have pushed it up,

even sulphuric acid prices are rocketing because it is used in so many of these processes and they cant get enough,

in australia at the moment phosphate prices are going through the roof ad everyone is scrambling to see where they can get a slice of that market

its fucking nuts if you ask me