Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

US Inflation Soars - Largest Rise in Producer Prices Since 1973!

Economics / Inflation Dec 18, 2007 - 11:23 AM GMT

By: Money_and_Markets

Economics

Best Financial Markets Analysis ArticleMartin Weiss writes: Suddenly and without warning, price inflation — long ignored and forever understated — has burst onto the American scene with the force of a cat-5 hurricane.

The November jump in the U.S. Producer Price Index has exceeded the largest single-month rises of the Bush 2000s ... the Clinton '90s ... the Reagan '80s ... and even the Carter '70s. It's the worst bout of wholesale price inflation since the aftermath of the 1973 Arab oil embargo.


It's the equivalent of over 38% inflation per year — a double-digit reading so high that not even the usual line-up of statistics-manipulating bureaucrats or double-talking politicians has dared come forward to spin the news.

And it is here. Now!

What's most remarkable, however, is the fact that, in the past, there was always an excuse. This time, there's none.

In the past, whenever there was a surge in U.S. prices, it could always be blamed on a geopolitical event, an international cartel, or some other powerful force beyond our government's control. This time, it cannot be.

Gasoline: Up a Shocking 34.8% ! Annualized Rate: Over 417% !

Consider the wholesale price of gasoline, for example.

In the month of November, it wasn't up 5% or even 10%, either of which would have been shocking enough. Instead, it surged by a record-shattering 34.8%!

And that's not an annualized pace of 100% or even 200%. It's over 417%!

This is the first time in American history that prices have surged so dramatically in the absence of a massive outside force ...

Back in 1980, for example, the largest one-month jump in the wholesale price of gasoline was in February, when the Iranian hostage crisis was reaching a crescendo and Iran was threatening to remove millions of barrels of oil from the world market.

The image of Ayatollah Khomeini loomed large over Iranian society and over the world's oil markets, with a force and foreboding larger than George Orwell's Big Brother or today's Mahmoud Ahmadinejad.

How much did U.S. wholesale gas prices rise? Just 6.8%.

In 1990, a big gas price surge came in August.

The obvious culprit: Saddam Hussein, who suddenly got the bright of idea of invading neighboring oil-rich Kuwait, plundering the country and setting afire thousands of the nation's oil wells.

The hellish spectacle of the smoke-blackened desert — along with the reality of massive supply destruction — naturally drove up the price of gas. How much? 17.1%. Then ...

In 1999, the worst price surge came in April. And again, U.S. authorities could point fingers at an outside force: OPEC.

At their March meeting in Vienna, the world's largest oil producers suddenly decided to cut production by two million barrels — and to maintain that lower level of output for a full year beginning in April.

The metaphor for this momentous decision came on March 23, at exactly 4:26 PM Greenwich Mean Time.

That's when Kuwait Oil Minister Sheikh Saud Nasser Al-Sabah stared into the press cameras, wiped his mustache, and signaled OPEC's determination to make a major impact on world oil markets.

The wholesale price for gasoline in the U.S. surged by 28.8%.

So What's the Excuse This Time?

Today, we have no sweeping new revolution in Iran ... no sudden and unexpected invasion of an oil-rich country ... no big production cuts by OPEC.

No. Today, what we have instead is precisely what we've been warning you about week after week: The biggest bout of the most shameless money-pumping we've seen in our lifetimes.

This time, the leading culprit is the U.S. Federal Reserve. But they're not the only ones. Following their lead in the money-printing spree are also the central banks of Europe, Japan, China and India ... and in their footsteps, the central banks of emerging markets all around the world.

This time, the primary force behind the surge in energy prices is the greatest, most flagrant violation of prudent monetary policy of modern times.

And this time, the image that looms over the world's markets is not an ayatollah in Iran ... not burning oil fields in Kuwait ... and not OPEC ministers in Vienna. It's the visage of none other than Fed Chairman Ben Bernanke.

Look again at the facts and you'll see why this is actually the most frightening scenario of all:

 February 1980: The Iran crisis drove U.S. wholesale gas prices up by 6.8%.

 August 1990: The Kuwait crisis drove gas prices up 17.1%.

 April 1990: The OPEC crisis drove gas prices up 28.8%.

 November 2007: The crisis created largely by the Federal Reserve itself has just driven gas prices up by more than all of the above: 34.8%!

The Proof of Reckless Monetary Policy

How do we know that the Fed's monetary policy is so reckless? In his Friday report, " Fed Fumbling in the Dark; Investors Losing Confidence ," Mike Larson provides the proof:

"Year over year, producer prices are up a hefty 7.2% — the biggest jump since November 1981. The last time that happened, 30-year Treasuries were yielding around 13% versus about 4.6% now. ...

"The Fed has to take a stance. They can (A) target inflation aggressively and do their best to slay the beast, economic consequences be damned ... or (B) just admit they're trying to reflate the housing and mortgage markets ... that they don't care if that drives inflation higher in the short term ... and that they'll deal with prices later."

Indeed!

Back in 1981 , the Fed was stepping in aggressively to tighten money and pushed interest rates up far higher than inflation.

Result: The difference between the 30-year T-bond yield and producer price inflation was a robust 5.8% , paving the way for two decades of stable prices.

But now , the Fed is doing precisely the opposite:

It's pumping in so much money, it has artificially driven interest rates down far lower than the true inflation rate.

Result: The difference between the 30-year T-bond yield and producer price inflation is a minus 2.6%, paving the way for years of surging prices .

In his Thursday Money and Markets , " Fed Feeding Food Inflation ," Larry shows how this is driving the price of wheat, corn, soybeans and other commodities through the roof. And as Larry has stressed for many moons, it's not just food. It's "every natural resource under the sun."

That means surging prices ahead for gold, silver, energy, construction materials, even water. It also means a wave of inflation the likes of which has not been seen since the 1970s.

And it means a massive battle looming between:

>  powerful market forces driving interest rates higher and ...

>  a Fed that's desperate to push them down further.

For you, that translates into the most unique threat to your financial well-being in at least three decades — and, at the same time, the most unique wealth-building opportunities of a lifetime.

Listen to my audio posted on our website yesterday for my thoughts on how unprecedented this is.

And stand by for our e-mails with more detailed instructions on what to do next.

Good luck and God bless!

Martin

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules