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Sunday, February 6, 2011

Inflation, HA! People misunderstanding the forces at work

Everywhere I read, bloggers are saying that Ben Bernanke is creating inflation through massive US dollar printing. While I completely agree Ben Bernanke is creating a situation that may eventually bring the US to it's fiscal knees, in conjunction with congress, I am not, and have not, blamed the primary cause of rising resources on good old Ben.

As I stated back in 2008, and now we get to see it play out in real time, that China and India with increasing wealth is going to drive resources through the roof! What Mr. Bernanke is doing is ensuring fixed income rates are depressed, and ensuring that your income cannot keep up with rising food, energy, and natural resource costs.

Today we have a sneak peak on what is in store. China has announced it's intention to import 9 million tons of corn in 2011-2012. Why is this a problem? The US department of agriculture estimated 1 Million tons!.

My god, that is a striking mis-estimate! No wonder Corn, Rice, Wheat, and other foods are going through the roof. Many gold bugs point to rising food costs as proof Mr. Bernanke is causing food prices to rise. I say hogwash. The China and India importing machines is starting to rev up and they will soak every last ounce of resources from the world as they try to attain a better living standard.

Combine this with pressure on fuel costs as China also soaks up every last barrel of oil, we have a real firestorm a brewing.

Mr. Bernanke is helping ensure Americans get a full, hard, punch in the face by ensuring they cannot save in fixed income to keep up with the rising costs ahead. This is exactly why I am not in favor of 100% in fixed income. For rising resources is not in control of the Federal Reserve Bank. Sure, we can have another market collapse to help cool off growth.

But east's hunger has awaken, and may only take naps, before it starts to eat again.

Mr. Bernanke has saved insolvent banks from declaring bankruptcies, and actively pursued suppressing interest rates, to ensure those who do not have enough savings to invest in natural resources, cannot keep up with the rising costs ahead.

What shows me that Ben is destroying the USD and causing rising resources? Why escalating interest rates breaking out of the 30 year bond market bull trend, or USD valuation falling compared to other currencies. Anything else is smoke and mirrors, keep an eye on China and India.

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