The Resourceful Bear Blog

Carlos Caminada, Shruti Singh and Jeff Wilson of Bloomberg report that the credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries.

Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years.

Harvests of corn and soybeans also are likely to fall, Basse said. Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.

"The credit situation is worrying even the biggest and best farmers," said Brian Willot, 36, a former University of Missouri commodity analyst who now grows soybeans on 2,000 acres in Brazil. "For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher."

In Brazil, the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri, a National Corn Producers Association vice president. The nation's coffee harvest, the world's largest, may drop 25 percent for the same reason, said Lucio Araujo, commercial director at farmer cooperative Cooxupe, located in Guaxupe.

Borrowing costs increased and farmers struggled to get loans after the worst financial crisis since the Great Depression made banks and grain processors, including Cargill Inc. and Archer Daniels Midland Co., less tolerant of risk.

Minnetonka, Minnesota-based Cargill and Decatur, Illinois- based Archer Daniels, the world's largest grain processors, are among the crop buyers to halt financing for growers in Brazil, said Eduardo Dahe, who represents the companies as president of the National Association of Fertilizer Distributors.

Charts
Grains, JJG, rose 6% today and 9% for the week ... JJG has risen 9% so far this week

Commentary
There is coming a dramatic rise in the price of food.

While austrian economists, those of the Mises persuasion, continually pound their "deflationary price" drums, I am continually relating hyperinflationary pressures.

Food Security Means Export Controls
Speculators driving up the cost of corn, means the end of of the neoliberal laissez faire capitalism and free trade economic policies that came through the work of Milton Friedman: Thomas Kutty Abraham of Bloomberg relates that “India, the world’s sixth-biggest corn supplier, banned exports of the grain to boost domestic supplies and curb inflation that accelerated to a 13-year high.”

It's just as Paul Krugman related: "Overall, there is no evidence supporting Friedman's assumption that speculators would act in a rational, stabilizing fashion. And in several episodes Nurkse's fears of destabilizing speculation seem to ring true."

Cryptogon relates the price of food has risen from 2007 to 2008

Keywords
foodinflation

Introduction
Today, the price of oil shot up to $139 on comments by the OPEC president saying prices could pass $150 and news that Libya may cut output, which sparked a major stock market sell off: the world has passed from the age of 'investment prosperity', and 'Milton Friedman neoliberal laissez-faire policies'; and into the age of 'financial disinvestment and instability'; and age of 'state corporate rule'.

The yen carry trade unwound today
The chart of EUR/JPY, FXE:FXY, the barometer of the yen carry trade, fell from yesterdays all time high of 1.70 to close at 1.69 today, as stocks fell on the higher price of oil, signifying that Bank of Japan lending is not being accessed, and that investors are selling assets to repay their 0.5% interest loans used for stock and commodity investing worldwide.

One could actually see the use of the yen carry trade topping out as RSI rose to 70 and the EUR/JPY encountered resistance and manifested a gravestone and lollipop hanging man candlestick.

The EUR/JPY's recent high eclipsed the previous high reported by Shing-Ip Tsui in TradingMarkets.com, July 29, 2007, when the Yen moved sharply higher on a massive carry trade unwinding at that time. And the yen, FXY, jumped sharply higher today, providing definite signal to the end of the yen carry trade.

Then, as Alex A. Kazmarck reports, came more yen carry trade sell off in August 2007 to take the EUR/JPY down to its early September 2007 lows of 1.54.

Using past history as an example, we are going to see a rapid decline in EUR/JPY.

Investors sold out of long favored yen carry trade investments and stock markets world
The long time destination of Bank of Japan loans, the BRICS, EEB, fell with Brazil, EWZ, India, INP, and China, FXI, all trading lower.

The Nasdaq, QQQQ, has a lot of yen carry trade support, it fell 4% lower; one could see it coming as its chart RSI fell below 50 not only once but twice lately.

The overall US Stock market, VTI, fell 2.9% through the middle of a 'broadening top pattern' going back to November 2006.

Freddie, Fannie, the banks, and investment bankers all fell lower
Freddie Mac, FRE, which had fallen massively in a running triangle, collapsed 7% through support to 18.50.

The market place sell off of both Freddie Mac, FRE, and Fannie Mae, FNM, since May 1, 2008, has left these organizations so capital depleted that they are going to be reaching a point soon where they cannot lawfully continue in business securitizing new loans let alone continue in operation overseeing their current loan base.

There is a total disconnect between Freddie Mac's market place value and the legislation that Congress is sending to the two Mortgage GSEs: the market place is saying these organizations are on their death beds; and Congress is sending more debt their way.

Said another way traders in the financial market are trying to drive a silver spike through the hearts of the two GSEs, while Congress is trying to blow their bubble higher.

It is truly stupendous that Congress is in the process of passing the Dodd Frank Housing Bill, which is really the Bank of America Bail Out Bill. This behemoth expands debt obligations of the United States which is not what we need; the housing bill privatizes profits to Bank of America and socializes real estate losses onto the public. Unfortunately Nancy Pelosi is working with President Bush to overcome his objections and the legislation very well may be passed. The US Congress is simply 'filling the tree', conducting crony capitalism and doling out pork in a lavish gesture of corporate welfare.

The Dodd Frank housing bill is a defacto nationalization of the US housing industry where investment risk and real estate property ownership is transferred from banks to the the tax paying public.

Doug Noland writing in PrudentBear Safhaven article reports that "Fannie and Freddie combined for May "book of business" (portfolio and guarantees) growth of $56.9bn, or 13.3% annualized, to $5.200 TN. This likely exceeds total net household mortgage debt growth for the month. Freddie's retained portfolio surged $32.8bn, or 53% annualized, to $770.4bn (surpassing Fannie!). Combined with Fannie, GSE retained portfolios expanded $41.4bn, or 34% annualized, the strongest month of portfolio growth since 2003. Year-to-date, Freddie's "book of business" has expanded almost $89bn, or 7.9% annualized. Fannie's "book" has increased $120bn, or 10.3%, annualized".

Banks, KBE, fell 3.6 percent; and investment bankers, KCE, fell 4.2%

Commercial lenders Capital One Finance, COF, fell 6%, and CIT Group fell, CIT, 12%. These being capital depleted, are now unlikely to meet corporate loan demand and the current crunch may morph to become "credit gridlock", where corporations may not be able to obtain working capital, and thereby go bankrupt.

Stock and bond deflation will now accelerate
Disinvestment from stocks globally will continue: the twin spigots of fiat wealth creation, Alan Greenspan and Ben Bernanke Federal Reserve Liquidity, and Bank of Japan lending at 0.5% lending have been turned off, with the result being, stock and bond devaluation will accelerate globally.

Rising interest costs and risk aversion to stocks caused by the level two assets and level three assets at banks, KBE, and investment bankers, KCE, as well as the rise of oil induced inflation globally cutting into corporate profits, have been the factors turning off the spigots of liquidity; and these factors will now increase, to deleverage and deflate stock and bond prices.

The Gulf States are experiencing expanding liquidity
Matthew Brown of Bloomberg reports that : "Saudi Arabian M1 money supply growth, an indicator of future inflation, accelerated to 27% in May from 23% in April. Qatar's M2 money supply growth accelerated to an annual 53% in March from 33% in December, the Qatar Central Bank reported. Commercial banks' domestic lending grew an annual 60% in March, up from 52% in December."

The United States has passed through Peak Liquidity and Peak Credit
While many nations, especially those in the oil rich middle east, have ongoing liquidity flows, this is clearly not the case in America.

The metrics of liquidity show a topping off.

Reuters reports M2 has turned down.

The St. Louis Fed relates MZM has topped out; as seen in the date and value Of MZM:
2008-05-12 8670.6
2008-05-19 8720.2
2008-05-26 8748.0
2008-06-02 8762.2
2008-06-09 8753.7

Now And Futures.com relates M3 has topped out.

Mike Mish Sheldon relates we have reached Peak Credit which will produce continuing financial asset deflation, and, house value deflation.

Given today's jump in the price of oil, we are are not going to see "consumable item price deflation" and we are not going to see "headline price deflation". Rather price inflation is coming to such things as iron ore pellets, coal, bicycles, used clothing, chemicals, food, automobile repair, internet service, television service, utilities, glass used to fix repair windows, home roof repair, dental services, doctor services, veterinarian car, etc; the consumables and food will not be deflating in price.

Rising oil prices, is "cost burdening" manufacturers: they will be looking to streamline every way they can: they are not going to taking on new hires; this means personal misery and economic recession.

With today's oil price rise, today's stock market sell off, rising risk factors and a contraction of investment liquidity, 'Global Depression 2', is well under way and cannot be turned back.

Liquidity inflows into China are not only decreasing; they are being discouraged
AFP reports that China's foreign exchange reserves, by far the largest in the world, hit 1.80 trillion dollars at the end of May, state media reported Friday.

The figure represents an increase of 40.3 billion dollars for the month, down from 74.5 billion dollars recorded in the previous month, the China Securities Journal reported.

It said the main reason for the drop was due to a cut in the amount of speculative capital flowing into the country.

"There was a significant change in May regarding capital inflow -- the inflow of 'hot money' dipped sharply," it said, citing Ding Zhijie, economist with Beijing's University of International Business and Economics.

The foreign exchange regulator's efforts to strengthen supervision of cross-border capital flows have started to bear fruit but a turnaround in the trend of international capital flowing into China is unlikely, Ding said.

State media reported last week that China's foreign exchange regulator had ordered banks to submit monthly data on non-resident domestic currency accounts in order to curb incoming speculative capital.

Speculative money is entering China as investors hope for gains from factors such as the continued strengthening of the yuan.

In May 2008 investors forsook the banks and investment bankers for commodities
'Financial ebola' struck the financial sector hard in May 2008 with institutional investors, such as labor unions and endowments, trading out of the banks, KBE, and investment bankers, KCE, and speculating in commodity indexed ETFs such as, RJI, and DBA, and mutual funds, such as PCRDX, as well as speculating in commodity futures such as West Texas Intermediate Crude, $WTIC, and the CRB, $CRB.

'Financial ebola' is the result of risk aversion to mortgage debt as can be seen in Kevin's aricle 2008
Mortgage Finance Index Update.

The CRB, $CRB, closed at a record high of 463; it's three white soldiers, of which the last is a lollipop, suggests that commodities have topped out.

The financial ebola of the financial sector can be seen in the three black crows pattern of the high dividend payers ETF, PEY. The banks and investment bankers are toxic, that is they are zombie corporations -- soulless, capital-eating monsters dragging the entire stock market lower.

And the ebola hemorrhaging of the banks is only beginning as the banks are for sure going to have to write down loan values now that Alt-A performance has gotten much worse in May, HousingWire reports. Banks like Washington Mutual, WM, and Wachovia, WB, are loaded with Pay Option Arms, the liar loans, most of these were rated Alt-A.

Cathy Chan of Bloomberg reports that Goldman says, Citigroup, the 'market leader' in write downs, may write down an $8.9 Billion soon.

MBIA Insurance Credit Default Swaps trade close to default levels
Reutuers reports that credit default swaps, CDS, on MBIA Inc's, MBI, insurance arm leaped to a new record on Tuesday as investors hedged their exposure to the insurer and concerns grew about the company's ability to reinvigorate itself after the loss of its top ratings.

Based on Monday's close, MBIA Insurance Corp's credit default swaps are trading at levels that imply the world's largest bond insurer is one step away from default, according to the credit strategy group of Moody's Investors Service.

The risk of a systemic risk event is now 100%. One risk here is that the Municipal Bond Market may completely implode as muni bond fund managers are now going to be forced to sell bonds that once were rated AAA and are now just AA rated; but there may be no buyers in the market; and thus another 'auction rate securities' freeze up scenario develop.

There are many other systemic risk scenarios: we could easily have a total system wide financial system breakdown, that is why I encourage investing in gold.

Investing long the markets no longer garners and preserves wealth
The Brics, EEB, falling well below their 200 day moving average; and the Russell 2000, IWM, falling from the pivot point of a 'broadening top pattern' of 72 going back to October 2006; and both the energy service companies, OIH, and the basic material stocks, IYM, falling parabolically lower; give clear, cogent, and convincing evidence that one cannot garner wealth by traditional investing long.

The Transportation sector, IYT, shows the "sell off dates" in the yen carry trade:
1) the island reversal coming with the TAF sell off on May 19, 2008,
2) the announcement of the Bank of Japan findings that inflation is an investment risk factor sell off on June 16, 2008
3) today's crack up boom in the price of oil.

Dow Theory reemerges as a stock market fundamental investment principle: it holds that it is not until both transports and industrials turn together that a bull or bear market begins.

The fractal fall lower in transportation stocks, when taken together with the fact industrials have already turned lower, provides Dow Theory confirmation that a bear market is underway.

Kevin relates that the Dow crashed through support today.

The Proshares Bear Market 200% inverse of the 30 stocks, DXD, has been the best bear market ETF performer since the May 19, 2008 failure of the Fed's TAF rally and the beginning of yen carry trade unwinding; this ETFs RSI passed over 70 today, indicating that it is going into an over-bought value.

Industrials have been under devaluation because of rising producer price inflation, that they have not been able to pass along; a factor cited by Dow Chemical, DOW, Chief Executive Andrew Liveris as Demand Destruction.

Dow Chemical is taking the lead and is now raising prices for a second time in a month.

Now with today's oil price boom the industrials have totally broken down as a source of garnering and preserving wealth.

With today's oil price rise, it's as Karen Christensen of Rotman Magazine reports marketing guru Godin: We've entered a post-consumer age

US Steel, X, which was recently yen carry trade invigorated, relates that the age of fiat wealth is over.

A run on the US Treasuries is underway
The bear cross of 50 over 200 day moving average in the US Government bond ETF, TLT, and turn lower from its March 18, 2008 high, when the Fed announced support for the JP Morgan buyout of Bear Stearns and provision of TAF, TSLF and PDCF facilities, documents that a run on the US Treasuries is underway: confirmation comes from todays weak 0.7% price rise. Very few who sold went to Treasuries today.

Nor will investors be investing in Treasuries anytime soon, granted there has been a seasonal sell off influence in the Treasuries; but nevertheless, investors see debt as a risk and will be selling out: yields are going to continue to go up and values down.

It's as Alf Field writes, stocks and bonds are going into the Abyss, and gold, $gold, will eventually, although possibly not immediately go much higher.

Today, gold stocks, GDX, are trading up with the price of gold, but it is only a matter of time before, they capitulate to a greater stock market deflation and fall lower as well. If one own gold stocks, I suggest that they sell out now, even if it be at a loss and buy gold.

A number of currencies rose
The gold currencies rose: the Euro, FXE, the Yen, FXY, the Australia Aussie rose, FXA.

The British Pound, FXB, the Swiss Krona, FXS, and the Canadian Loonie, FXC, rose as well.

Short selling and investing in gold are the only two options the investor has for preserving wealth.
Today's down in stocks means one may want to consider waiting for a rally to sell short.

Goldman Sachs recommeded today that one sell General Motors, GM.

Eddy Elfenbein reports that GM Hits a 53-Year Low

Strange isn't it ... Goldman Sachs was probably pushing the hardest on General Motors ... I think that with all the level three assets that it has, that they should issue a sell short recommendation on themselves.

General Motors, GM, and Ford, F, have fallen so much already, that they are not candidates for short selling.

It's striking that the nation that invented and produced the automobile, has seen its autombile sector market place decapitalized, even stranger for an investment banker to call for its total capital depletion.

Analysts say that General Motors has only eighteen months of capital burn left: thus as an American, I am simply standing by and watching the final lynchpin of US manufacturing burn down.

Today's fall of General Motors "makes the case" that American Enterprise has failed.

Charles Babbington of the Associated Press reports that Congress passed the Iraq war spending bill, and that the Senate narrowly failed to approve a House-passed bill to cancel a scheduled cut in payments to doctors who treat Medicare patients. This means, we have given the President all the funding he wants for a war in Iraq, and for one on Iran too if conditions warrant; and that doctors will not be taking on new Medicaid and Medicare patients.

The "misery result" of this Congressional action is that the elderly and poor who develop a new health problem, and need to see a new doctor, or who move to a new city, will not be seen by the doctor -- the physician's office doors are now closed to new Medicare and Medicaid patients, thus we have an application of the Liquidation Thesis which holds that government services and payments are going to be liquidated, that is done away with.

The US by conducting a war in the middle east, coupled with the economic and investment data presented above is in a gravely overextended position economically, which is another risk factor that is going to massively drive down US Treasuries.

Short selling turned profitable
Here is the five day gains for selected ProShares 200% inverse bear market ETFs:

Domestic stocks
SKK 12%
SRS 15%
SSG 16%
TLL 7%
SKF 14%

Foreign and basic material stocks
EEV 14%
FXP 14%
SMN 7%
HXD 5% It is resource laden and will thus be influenced by the mining and energy shares.

Debt
TBT - 5% It fell today on TLT's rising; but its recent rising heralds the Liquidation Thesis which holds that government debt is going to be liquidated, that is done away with.

My investment maxim is: "In a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength".

Thus one should add to TBT's dip in price today.

If the 200% inverse ETFs are too risky one might consider some ETFs for short selling; such as the ones from The Database Of ETFs TO Sell.

Having presented the details on short selling, I do not recommend it as all one is left with is a dollar denominated portfolio, which is forever decreasing in value.

Gold provides investment security in inflationary and unstable times
Gold, $GOLD, rose higher on oil's coat tail.

Gold surged in what was the largest one day move since 1985 and Kevin's chart shows gold exploding higher out of a pennant to closed at $917. It would have been good to buy gold during the last six weeks when it continually dipped around $880.

Whether gold rise or fall, I recommend one dollar cost average a buy of gold over the next two weeks, for three reasons:

First case for gold comes from the systemic risk factors above: a massive global wide finacial breakdown is coming, where traditional wealth is going to be awesomely reduced; gold is a storehouse of wealth in unstable times.

Second case for gold is simply the 'investment demand for gold' seen in gold relative to stocks, GLD:VEU. Since September, 2007, the central bank has cut its Fed Funds interest rate seven times and has provided the TAF, PDCF, and TSLF facilities, this has debased the US currency, and inflated the price of gold. On May 1, 2008, gold relative to stocks rose strongly again, as institutional investors traded out of bank and investment banker stocks and invested in commodity indexed ETFs, such as RJI, and oil, USO, and gold, GLD, and commodity mutual funds such as PCRDX.

Third case for gold is its rising value relative to currencies: gold is rising rising relative to the Euro, GLD:FXE, and gold rising is rising relative to the Yen, GLD:FXY.

Gold, $GOLD, in relation to stocks and bonds is "going forever higher". I encourage that one invest in gold via a trust account, and not a brokerage account, to dollar cost average buy the gold ETF, GLD; and that one dollar cost average buy gold, in at least two locations, such as BullionVault.com and GoldIsMoney.com.

Gold trades inversely of the US Dollar, $USD, which has been debased by the Federal Reserves ongoing actions of providing TAF, TSLF and PDCF, so that now a large part of the Fed's Balance Sheet is toxic junk, as subprime loans that once use to belong to the banks, were swapped out for AAA rated US Treasury Bonds.

I believe that the US Dollar, $USD, is going to lead all currencies lower in a death spiral together.

The downturn of USD/JPY from its recent 108.4 high to close today at 107.72 documents that a run on the dollar is underway.

Epic investment changes occurred this last week
The Macquarie Model died

Iceland's krona collapsed again

Today we passed from the age of 'investment prosperity', and 'Milton Friedman neoliberal laissez-faire policies'; and into the dawning of the age of 'financial disinvestment and instability' and age of 'state corporate rule'.
The turning lower of EUR/JPY, FXE:FXY, and stock sell off today, documents that the yen carry trade has unwound -- this is an epic investment sea change -- the yen carry trade unwound significant will never be used again for the massive ongoing type of stock investing it has been used for.

The yen carry trade is in a death spiral with stock wealth, especially the BRICS, and especially China, FXI, and India, INP.

However, the yen carry trade will be used by many who have access to it for investing or speculating or inflating, the price of gold and oil higher.

Generally and more and more the yen is going to be stronger than the dollar. USD/JPY is going down, and down and down.

While currently the US Central Bank rate is 2%, and Japan Lending Rate is 0.5%, the market place interest rates, the 30 year interest rate, $TNX, and 10 year interest rate, $TYX, are going to be rising. And the international interest rate, the Libor, and the Ted Spread increased just the other day.

Americans created an empire of debt, and bought to the max on credit, and manufacturers accommodated with product innovations and quality improvements. To maximize profits, factories were abandoned here, and constructed in China where there is an ocean of "hard working" young individuals.

All those consumer goods that came marked "Made in Taiwan" or "Made in Japan", were produced in China, and then sent for packaging to Japan and then sent here.

Japan acted as the financial intermediary, that is, it acted as the financial conduit, a seignior who took a cut.

Both Japan and China built massive forex reserves, and in so doing created the yen carry trade, which was used for interest rate differential investing, currency trading, and direct investment.

Well connected individuals and hedge funds have been the primary beneficiaries of the carry trade.

These have operating out of private banking coves in the British Isles and Caribbean where regulation is non existent.

The carry trade was used to invest, which is better termed inflate, natural resource stocks such as Petrobras, PBR, steel manufacturing companies, GGB, and of late natural gas producers, COG, energy service companies, NOV, irrigation equipment manufacturers, VMI, and transportation companies, R.

Now all of these stocks and investors wealth is going to rapidly deflate in value.

Wealth inflation and deflation, its all part of economic Long Wave Theory, described by jewish economist Kondratieff: today's stock market trading was Kondratieff Winter's first storm.

The yen carry trade also flourished in the CRB, $CRB, and indexed commodity ETFs, RJI, and mutual funds, PCRDX; the latter has grown 50% in just the last 18 months, as commodity prices inflated higher. These, having largely oil components, are likely to inflate higher.

The bottom line analysis here is that the fuse has been lit on a number of systemic risk events: it's just a matter of a short period of time before they go boom causing a world wide financial system breakdown: the investor should immediately disinvest from stocks and bonds, and over the next two weeks, dollar cost average an investment in gold.

A new age is dawning, the age of 'Framework Agreement Security And Prosperity', that comes through announcements such as the Security and Prosperity Partnership of North America, and the Declaration of EU US Summit of June 10, 2008.

Now august councils of elites, such as the North American Competitiveness Council, the NACC, meet in summits, to direct working groups who appoint stakeholders who oversee and manage security and prosperity initiatives of state corporate rule, over natural and corporate resources and the factors of production for the benefit of the continent and its people.

Jerome R. Corsi of WorldNet Daily recently interviewed Council On Foreign Relations, CFR, member Robert Pastor, a leading intellectual force in the move to create an EU-style North American Community, who related that he believes a new 9/11 crisis could be the catalyst to merge the U.S., Mexico and Canada into a continental union; I've pointed out that numerous times that a financial emergency would qualify as the reason for implementation of the provisions of the SPP.

And on a greater scale, the western world leaders now have authority to act, under the Declaration of EU US Summit 2008, on issues of global security and prosperity. And Jerome R. Corsi, also reports that this Declaration is of Magna Carta like importance, in that it provides a 7 year plan to align the EU and US in a super Western World Governing Body.

The first actions of the EU US Western World Government will be, as Chinaview.com.cn relates: solving the threat of Iran's controversial nuclear program.

Numerous sources such as the SeattleExaminer.com have posted the text of President Bush's appearance in Slovenia where he described the success of the EU US Summit 2008.

The Transatlantic Economic Council, TEC, is the supra organizing body for this initiative, and the White House posted its June 10, 2008 report 'Transatlantic Economic Council Report to the EU-U.S. Summit 2008' on the Internet.

Liberty and independence are gone forever: when the North American Leaders announced the Security and Prosprity Partnership at Baylor University on March 23, 2005 the Liberty Bell was retired; and then when the Western World Leaders announced the Declaration of EU US 2000 in Brdo, Slovenia, on June 10, 2008, the United States Flag was retired.

Investment Application
This coming age is one where the four Horsemen of Revelation, they being, Sovereignty, Violence, Famine, and Chaos are riding, with ever increasing intensity and strength, as is documented in the Mike Mish Sheldon news that a Dead CEO's Empire Crumbles.

Wealth is to be garnered and accumulated by investing in gold and gold alone.

Here is a what if question: "What if all of those who are selling out of their yen carry trade positions, go long gold and short their positions, or what if they use the 0.5% interest loan capability to go long gold, how far up might gold go?"

Keywords
New world order, newworldorder, one world government, oneworldgovernment, north american union, nau, four horsemen of the apocalypse, federal reserve debasement of the US Dollar, nwo,

There May Be A Relenting In The Rise In The Supply Of Money
Data from the St. Louis Fed shows a topping off in MZM:
Date And Value Of MZM
2008-05-12 8670.6
2008-05-19 8720.2
2008-05-26 8748.0
2008-06-02 8762.2
2008-06-09 8753.7

The chart from Now And Futures.com shows a topping out of M3

The question arises, "Just what is topping off? ... The data and charts show a topping off of 'money supply', perhaps better said, the data and charts show a topping off of 'liquidity'.

I believe Paul L. Kasriel of the The Northern Trust Company is saying the same thing: "Economic Research Department Although total asset growth has rebounded from slightly negative territory of late April, the latest 3.85% growth still is low in comparison with recent years' behavior. So, the Fed is not creating massive amounts of credit on its own. In yesterday's comment, I noted that the Fed had reduced its holdings of U.S. Treasury securities by billions of dollars in the past six months. In effect, the Fed has been "sterilizing" much of the credit it has been creating via the discount window and its new borrowing facilities."

I document in my article Topping Out And Downturn Of Oil Brings Stocks To The Edge Of A Major Downturn that peak wealth has now turned down ... the question arises: "Are we seeing a topping off of inflation?

Let Them Eat Inflation
Elaine Meinel Supkis relates:Let Them Eat inflation

"The world's working classes are being told to eat all the banker's inflation. Savers are being told to eat the inflation created by the Bank of Japan and the Federal Reserve. The US government is supposedly unable to overspend much longer but they will so long as Asia buys US Treasuries. And this feeds inflation! The more our government overspends on useless wars and occupations of foreign lands, the worse inflation will be. We are in a dynamic that will bring global hyperinflation unless we kill off many millions of people who are slated to starve to death or die in even more wars".

"For several years now, I have detailed how Fortress Japan operates. I used statistics, graphs and charts to show that the 'depression' there is artificial and manufactured so as to give Japan a banking advantage over all the other banks in the world. Instead of being honorable and paying a realistic return on savings for the Japanese people, the entire nation has endured and still lives under this bizarre sub-1% regime that is totally ahistorical and frankly, impossible."

"Even now, as inflation rages in Japan, the Bank of Japan sails onwards. The key is obvious: THEY HAVE NO NEED FOR ANY SAVERS IN JAPAN! They want FOREIGN money that comes in via the 'carry trade'. They want foreign money that comes in via high Japanese export of high-value added trade goods! This money has also filled the Japanese FOREX reserves to the tune of over a trillion dollars. And as we shall see below, the Japanese also hold the lion's share of US government debts. This is unheard of except for dying empires. All dying empires that are going bankrupt are in debt to foreign powers, even those which they have battled bitterly in the recent past. After all, there are still many people alive today who fought the Japanese in WWII."

Japan forges a secret alliance with China; the other alliances are a general Asia-Taiwan-China economic and investment alliance, as well as the ASEAN economic alliance.
"Japan is now performing a banking coup which I accurately predicted. The only thing that prevented this was China. And after China forced the value of the yen to go up and up last summer, killing the Japanese carry trade and throwing a monkey wrench into global finances, Japan has settled all their external affairs with China in a series of both public and extremely private meetings. When the top bankers of Japan and China met in a series of incredibly important meetings last winter, I suggested they would resolve the issue of who owns what oil reserves that lie between Japan and China as well as banking issues such as forcing the other G7 nations to shut up about the yuan being too low in value."

"Japan has NOT really surrendered in WWII. The desire to forge a Co-prosperity Sphere with Japan ascendant is still ongoing. Only they have had to switch gears. The US is weakening rapidly and is barely functional now. While China is a growing power and a true menace. Japan has to forge tight relations with China or perish with the US when we go bankrupt. They have made it clear, they will not sink when our own ship goes down."

"Back last August, by the way, I accurately predicted that the Japanese were not going to be much affected by the Western banking collapse. Indeed, in August when the US and Europe were screaming and running in circles, Japan pretended to scream too. Then, by the end of September, Japan shrugged and said, 'Ah....we were faking it. We are doing well thanks to our giant FOREX reserves and we think we will talk to the solvent Chinese....hahahaha.' Last January, Japan even announced they would replace England as the center of global banking. Well, this certainly seems to be true, eh?"

"After all, China, Mexico, Canada, Australia, Europe, many lands are raising interest rates. But not Japan nor the US. Both are flooding the world with more liquidity. Both are chewing up the entire forest and dumping the trees into the log jam. Both are fanning the flames of inflation."

Alistar Barr of Marketwatch relates "The shadow banking system model as practiced in recent years has been discredited," Ramin Toloui, executive vice president at bond investment giant Pimco, said. Toloui expects greater regulation of big brokerage firms which may face stricter capital requirements and requirements to hold more liquid, or easily sellable, assets.

Ms. Supkis continues: "The LAST THING these gnomic piratical hell hounds want to do is HOLD THE LIQUIDITY they are creating! They need to get rid of it as fast as possible so they can create more. The world is drowning in this liquidity and they do not want to have this stop. They want us to eat the inflation while they get to live like princes and princesses."

"I like to read Leap 2020. They have good analysis and this is a precious thing. The pie chart here is amazing: it shows clearly that the US has been selling its debts to the same characters who are ravaging us with trade excesses. And very emphatically, there is Japan, at the top! The US is frantic to cut trade with China but not Japan but these two should be viewed as two sides of the same coin. We have no allies anymore in Asia. We have OWNERS."

Martin Crutsinger relates that U.S. steel pipe manufacturers, who have been battling a surge in imports from China, won a major victory Friday when the International Trade Commission cleared the way for the imposition of stiff penalty tariffs for the next five years.

The commission voted 5-0 that the U.S. industry was being harmed by the import of circular steel pipe. The decision marked the first time a U.S. industry has won a decision to impose tariffs on a Chinese product based on the argument that the Chinese government was unfairly subsidizing a Chinese industry.

The ruling means penalty tariffs ranging from 99 percent to 701 percent will be imposed on Chinese imports of circular welded pipe, a form of pipe used in a variety of construction jobs, such as home plumbing and sprinkler systems.

For more than two decades, the U.S. government had refused to consider subsidy cases against the Chinese government because China was classified as a non-market economy.

Ms. Supkis continues: "Pipe is NOT high-value added goods. Cars are. Japan is flooding us with cars. China is not. Nearly all of China's trade is at the cheaper level stuff of are outsourced work for US or Japanese corporations such as computers, for example. China will retaliate for this, by the way. It depends on their intentions. Since the US Congress and all Presidents now and future want to run huge budget deficits, we need the Chinese to buy our debts. China won't do this unless we make a deal. We will make the deals. This pipe thing is a sop. China is preparing to flood us with cars. We have to figure out how to stop free trade before it kills us. But it may be too late."

Jens Erik Gould relates: Mexico's central bank unexpectedly raised its benchmark interest rate, ignoring suggestions by President Felipe Calderon that borrowing costs were too high. The decision to raise the rate a quarter percentage point to 7.75 percent signals the bank doubts Calderon's measures to freeze some food prices will do enough to reduce prices. Mexico joins Chile, Brazil, Vietnam, Turkey and banks around the world in raising rates to fight inflation driven by food and energy.

And Ms. Supkis continues: "All major nations aside from the US and Japan are desperate to dry up liquidity so inflation stops. And they will fail. So long as the world's #1 and #2 economies are playing this alternative game, all other attempts at stopping global inflation will fail. Not until the US goes into a full scale collapse. Then we will end this inflation. Japan is hysterical about preventing us from not shopping. They very much desire we buy their export products! They will give us whatever liquidity we need to keep on going into debt. This is why we are deep in debt! Duh. Then we send this money to Mexico for manufactured goods and oil. And Mexico finds this money increasingly worthless."

"China just may give us a blow to the economic forehead if we don't stop making liquidity faster than they can store it away. They also want us to stop the oil wars, stop boycotting Iran, stop talking about blockading Iran, stop all this WWIII talk. Then oil prices will fall. Russia is happy as a pig in mud over all this."

Wars and street violence are coming -- a pyramidal society is quickly forming
"The incomes and savings of everyone will vanish but not the bankers who caused all this. And what if the Bank of Japan continues to create new money via the carry trade? And what if the US continues to do the same with nearly as low rates as Japan? What then?"

"Well, the British people can die. Many millions of people will die thanks to this inflation eating diet. It will work in the end, eventually, after enough people are driven to total poverty and then starve to death. Isn't that charming?"

"We are in a contraction that has to get worse if the consumers and workers have to eat inflation which means they can't buy anything except bare necessities".

"Back last year, actually, in 2006, I warned that all downturns take a while to go through. The 'short' one of the Dot Com collapse never was 'fixed.' The markets never returned to full strength when you factor in inflation. Manufacturing is still below where it was in 1999, for example. Housing shot up but now it is below where it was in 1999. The brief 'hysterical happy bubble' era was really a period of decline. For the US rang up Federal deficits to the tun of over $5 trillion and over $6 trillion in trade deficits. This $11 trillion in red ink is on top of the housing red ink which is another $11 trillion. This was not a period of capitalist prosperity. It was 100% pure debt. Which has to be eaten as inflation. Thank you, Greenspan."

We Have Arrived At The End Of The Era Of Investment Prosperity And Are Beginning On The Era Of The Investment Demand For Gold
Like Ms. Supkis, I hold that the yen carry trade has been one of the two great investment dynamos of the age of fiat wealth prosperity; the other dynamo has been Alan Greenspan credit liquidity, and more recently Bernanke helicopter drops of liquidity onto the markets, by reducing the interest rates and provision of TAF, TSLF and PDCF facilities.

The chart of the EUR/JPY, FXE:FXY daily, and FXE:FXY weekly, serves as the barometer of the yen carry trade and inicates that the TAF rally ended May 19, 2008; and the yen carry trade rally ended for all practical purposes on June 10, 2008; but the Bank of Japan lending window has remained open providing loans at 0.5% interest which has sustained investment right up through the end of stock market trading on Friday June 20, 2008 in indexed commodities ETFs and mutual funds, such as oil, USO, which traded up 2.1% manifesting a doji to close at 109, as West Texas Intermediate Crude, $WTIC, did likewise to close at $136.

This week's rise in the gold ETF, GLD, as well the rise in currencies, FXE, FXY, FXA, FXB and FXS, came partially through yen carry trade loans, and the other part came through investors buying both these gold currencies and gold itself.

The Federal Reserve's provision of the framework agreements of TAF, TSLF, and PDCF have only served to debase the US Currency, destabilize bond and stock markets worldwide, and inflate the price of commodities, RJI, especially oil, USO, gold, GLD, and agricultural commodities, DBA globally.

This week's 3.5% rise in Gold, $GOLD, and the US Dollar's, $USD, 1.5% decline, documents that an investment demand for gold is underway, as investors seek refuge in the safety of that hard asset from concerns over inflation, as there is a growing disinvestment from stocks especially in the BRICS, EEB, as the yen carry trade unwinds, as concern grows over Timothy Geithners' call for unified regulation of banking globally, as well as the likelihood of a military strike upon Iran's nuclear facilities, under the authority of The Declaration of EU US 2008, or by the Israeli air force itself.

All Fall Lower Together
Back to the question: Are we seeing a topping off of inflation?

Part of the answer comes from the questions, What is MZM and what is M3? and What is Inflation?

MZM and M3 are not inflation, they are metrics of inflation and they are the fuel of inflation. MZM and M3 are like fuel put in vehicle, they are the combustibles that make economic things move.

Inflation is a rise in headline prices, consumer prices, commodities, RJI, stocks, VTI, bonds, BTTRX or TLT, and currencies, FXE:FXY, and home prices, caused by the issuance of debt through financialization (securitization), the issuance of LBOs, under-writing of mortgages by the GSEs Freddie Mac and Fannie Mae, the Federal Reserve lowering of interest rates and provision of TAF, TSLF and PDCF facilities, the Bank of Japan, BOJ, lending a 0.5% interest, government defecit spending, the stimulus package, the use of stock market credit margin, and the bankruptcy courts allowing companies that should have been liquidated to stay in business.

Deflation is the opposite, a fall in the above caused by contraction of debt (credit), abandonment of financialization due to the avoidance of risk and the repayment of Bank of Japan loans.

A financial emergency, that is a systemic risk failure event, is coming from a commercial credit shortfall, that is a "credit gridlock" or Treasury repo fails or from any number of other causes.

The financial emergency will be deflationary, it will be the stimulus that makes things worse, it as Ms Supkis relates: "We are in a contraction that has to get worse if the consumers and workers have to eat inflation which means they can't buy anything except bare necessities".

Not only will the financial emergency be deflationary, but it will also cause enforcement of the provisions of the Security and Prosperity Partnership of North America, the SPP, where the North American Competitiness Council, and working groups oversee investment, commerce and trade, and appoint stakeholders to manage natural and corporte resources as well as the factors of production.

Yes, a number of currencies were up this week, these included:
the Brazilian real 1.9%,
the New Zealand dollar 1.5%,
the Australian dollar, the Aussie, FXA 1.5%,
the Euro, FXE 1.5%,
the British pound, FXB 1.5%,
the Danish krone 1.5%,
the South African rand 1.4%,
the Norwegian krone 1.4%,
the Canadian dollar, the loonie, FXC 1.3%.
the Japanese yen, FXY 1.0%
the Swiss krona, FXS 1.3%

But this will not always be the case, the US Dollar, is going to lead all currencies lower, in a death spiral together.

While gold could easily fall to $840, it is currently inflating higher in an Elliott Three Wave Up; and stocks and bonds are in an Elliott Wave Three Down, as Alf Field relates, Into The Abyss.

The truth is nothing I write, say or do, will stimulate anyone to invest in gold.

Either one "sees" the wisdom of investing in gold, or one does "not see".

There is that great Milton Friedman question: "Free To Choose?"

What a bunch of baloney!!!!!

It is totally the wrong construct. His question is all part of the establishment matrix, which enslaves.

I'm a red pill kind of guy; and I didn't choose to take the pill.

I was force fed the pill by God! That's what the Bible says in Jeremiah 25:28 and in 1 Corinthians 12:13. Yes I was made to drink of the One Spirit, and I came to believe sound bible and investment principles.

I didn't have any choice, It was ordained from eternity past that I believe ... Ephesians 1:4.

God is sovereign and has two kinds of vessels: those who see, and those who do not see; the first vessel is found in Romans 9:20-23 and the second vessel in Isaiah 51:20 and I Thessalonians 5:9.