Oil price at 32 month high, weak dollar, gold at record high, silver highest since 1980.... Where is it going to end?

Oil price surges to 32 month high

Let's not forget to factor in UK retail spending contracting, UK manufacturing weak, UK government focused on anywhere but home... Happy Days

 

Only saving grace is that in 2007, oil hit $147 a barrell. Problem is, £1 bought $2 back then.

 

Factor in the £/$ exchange rate and oil has hit an all time in here.

 

How convenient for our skint government whom make a large percentage of their tax revenue from fuel taxation. I wonder if Gadaffi knew what they were planning

 

Surely you're not saying that the UK government sees the rising oil price and hence rising VAT revenue from fuel as a useful by prodct of its latest military exploits

 

So our reserves will now be worth a fortune! Oh, wait. Didn't that idiot "Prudence" sell it all off when the price was at its lowest.......

 

Good point. well made

 

Sold off 400 tonnes of the stuff at a 20 low price (even after getting advice not to), in today's terms he lost £5Billion on that deal.

 

£5Bn here, £5Bn there, it soon adds up to serious money!

 

What are you lot talking about, the growth in the UK economy surged by 0.7% in Q1 of this year!!

 

Meaning it grew 0.2% in the last 6 months. Careful as we'll be in a boom next

 

Wonder why commodity prices are surging so soon after a global downturn. Wouldn't be anything to do with stimulus of course...

 

Quite probably, but stimulus where? In the UK or our neighbours or both?

 

Both, money in circulation or in banking systems has to have increased everywhere. There is a major link between the stimulus in the U.S. and soaring commodity prices IMO. When the central banks try to create demand, that is naturally the outcome. Of course there's demand from the currency you 'print', but all that does is push up the nominal price and transfer purchasing power from the people who have the existing money to the new money. I bet there is a lag here while what I've just described filters through the system... and so it may take years for that initial inflation to show up across the board and be reflected in the official stats. We're already seeing it, the U.S. is getting away with it for now probably because they can, in a sense, export inflation, having the world's primary currency. In other words, the inflation in that case would, at first, only appear in the global commodity and stock markets, etc, without having much of an effect within the U.S. itself.

Here's an article that touches on it - http://online.wsj.com/article/SB1000...782421930.html

The next question is what the U.S. is going to do next? A book I read a while ago, which was written in 2004, pointed out the figures: they have massive liabilities for social security and the like, which even back then weren't possible to pay.

In a paper from 2003, by a senior economist at the Federal Reserve Bank of Cleveland and the former deputy assistant secretary of economic policy at the U.S., they asked what the situation would be if the U.S. government today (in '03) could get its hands on all the revenue it expected to get in the future, but had to use it, today, to pay off all future commitments, including debt service. Would the discounted present value of its future revenues be enough to cover the discounted present value of all its future expenditures?

Their calculations showed a shortfall of $45 trillion. And that was in '03... whereas today these obligations have been extended much further, and they have the massive public debt too.

They also offered four alternative ways of making up the shortfall, starting immediately.

1) Raise income taxes (individual and corporate) by 69%.
2) Raise payroll taxes by 95%.
3) Cut Social Security and Medicare Benefits by 56%.
Or 4) Cut federal discretionary spending to zero.

Now, none of these things are going to happen (and remember the figures will be substantially higher now. So it does make you wonder what is going to happen here? Considering the way governments have gone about things in the past, inflating away the public debt for starters does seem likely. But it still doesn't get rid of these future obligations. Anyway, safe to say there will be more inflation.

Then, as if that wasn't bad enough, you have the fact that interest rates in the bond market for the U.S. and other developed countries are staying very low because the world is so used to the status quo, and is so unwilling to believe the reality of the situation. When you look at the above figures, the situation for America is crystal clear, but nothing happens because people refuse to believe such an amazing situation, partly because they've had the reserve currency for so long and U.S. bonds have historically been seen as a safe haven.

The bond market will only stay the way it is until the practical aspects start to kick in... they can only kid themselves so long. But once they start to feel the effects the faith will vanish.

Anyway... it's all so far away in the future it's probably not worth worrying about, it's a Friday FFS and I'm off out.

^^ That in itself is the attitude that's maintaining low rates in the bond market.

 

According to the CEO of on the biggest banks on the planet, batten down the hatches.

The next four months are crucial to a major European economy going under. Bigger problems than Ireland/Portugal/Spain/Greece put together. It is now in a crucial phase. His strategy has been to build a war chest/deposit base of 500bn euros.

Get into cash and stuff it under the mattress.

 

That being true it means the bond market is a Ponzi scheme of sorts, and that if the US Gov was a bank it would be insolvent.

It's funny really - so much about the present financial system is a hall of mirrors, it's doomed to fail again at some point in the future. We could have let it fail during the credit crisis but instead with did what seemed like the least painful think which IMHO will mean more pain down the line that what we would have had in 2008.

....and another fiat currency will be added to the list of histories failed fiat currencies.

 

The crowd have been going into stock for sometime. Maybe you and he is right!

 

The US is insolvent - but who is going to call in their loans? China - if they did it would finish China for decades.

It is better to brush it under the carpet and pretend it will all go away!

 

my father told me a something many many years ago

no company goes out of business for not making a profit, they go out of business for not having any cash

the US will not run out of cash (any time soon)

 

So can the government now afford to give all that cash away to other countries regardless of the cuts it has to make?

Les