Monday, October 11, 2010

Don't forget the mint

The G-7 Finance Ministers (that’s the old money countries) met at the IMF-World Bank meeting on Saturday and could come up with nothing to solve the currency war and basically handed it off to the IMF to deal with. The IMF has already been intimidated by China over its manipulation of the Chinese Yuan and is ill equipped to do anything. The IMF prefers to bully small countries who have been put in a cash flow crisis as a result of predation by the big corporations. They impose austerity measures and eliminate the victim’s social safety net and then force that country into accepting even more predation by the same big corporations. China in fact treats the victims of the IMF much better and is building a broad based coalition in China’s favor.

The USD continues to fall as it is becoming seen as inevitable that the Federal Reserve will start printing money in a big way. The weak dollar is driving up the price of  grain in the US and on the Chicago Board of Trade corn futures  were up the limit again today. An awfully large chunk of the US economy runs on corn and this is going to create inflation pressure on the rest of the economy. That Christmas ham is going to cost a lot more with the wholesale price already nearly double from last year and inflation hasn’t really taken hold yet.

Officially there is no inflation with the Social Security Administration saying there will be no cost of living adjustment again this year. Indeed there is still talk of deflation as the day of reckoning looms on trillions in commercial loans that will come due over the next few years that are seriously underwater. Add to that trillions in corporate junk bonds left over from the last round of mergers and acquisitions that are also coming due and not likely to be paid.

Then of course there are millions of home foreclosures that may or may not be resolved and that could drag down some pretty big banks. The Federal Reserve holds a couple of trillion of the toxic assets based on those mortgages, but they can’t go bankrupt, it’s just that our money might not be worth much after that reckoning.

Gold is on the way up again but I wouldn’t run out and buy any unless you really have a lot of money to risk, you are likely to lose money. I would however recommend adding canned hams to your portfolio.