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Pentonomics - The ISM says Inflation is Here
Posted by Michael Pento on 03/01/2011 at 8:41 AM

Bernanke said today during his semi-annual monetary policy testimony before the Senate Banking Committee in Washington that the surge in oil and commodity prices in general probably won’t cause a permanent increase in overall inflation and reiterated that borrowing costs are likely to stay low for an extended period of time. He also admitted that the Federal accumulation of massive quantities of debt would soon harm the economy, but that now isn’t the time to reduce government spending. In fact, in response to a question from Sen. Reid regarding the dangers of reducing deficit spending this year, Bernanke warned that scaling back government spending would hurt GDP growth.

Regarding inflation, the Chairman also said that stable labor costs would lead to, “a temporary and relatively modest increase in U.S. consumer price inflation,” Ok Ben, now let’s look at reality. The ISM February manufacturing survey released today showed that the prices paid component has now reached 82. This is what survey respondents have to say about the current inflation situation:

"A continued weak dollar is increasing the cost of components purchased overseas. It is going to force us to increase our selling prices to our customers." (Transportation Equipment)

"We continue to see significant inflation across nearly every type of chemical raw material we purchase." (Chemical Products)

"Prices continue to rise, while business limps along at last year's pace." (Nonmetallic Mineral Products)

"Overall demand is off 10 percent." (Plastics & Rubber Products)

So who should you listen to, Bernanke or Markets? Bernanke says we have “low and stable inflation”, but the dollar is falling, commodity prices are surging and manufactures and food producers are screaming for help. I don’t know about you but I bestow the same respect and value to what the Fed has to say as I do belly button lint.



Tags:  commoditiesinflation
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Pentonomics - The Return of the Misery Index
Posted by Michael Pento on 02/09/2011 at 1:24 PM

The website Zillow.com reported today that YOY home price declines were 5.9% and that of those homeowners with a mortgage, 27% were underwater on their property. Maybe this concrete evidence of a double-dip in the real estate market has something to do with surging borrowing costs. Today, the cost of a 30 year mortgage hit 5.13%, up 32bps in just one week!

Not only is the cost of homeownership rising but so is the cost of food. Thanks to the government’s genius decision to burn 40% of the corn crop on ethanol production, corn stocks are now the lowest in 15 years—with a stock to use ratio of just 5%. That means corn prices are set to increase yet again from their already lofty levels.

Consumers that don’t happen to have direct access to a government bailout or who aren’t in line to receive a huge Wall Street bonus are indeed feeling the pain. In fact, the Misery Index hit a 26 year high for 2010. The index—which is simply the addition of the unemployment and inflation rate—reached 11.29. You have to go all the way back to 1984 to eclipse such a level of pain. Only back then, inflation was calculated without the “benefit” of the manipulations of the Boskin Commission. Therefore, the Misery Index should be, in reality, much higher than 11.29 and is probably closer to the pain we felt under Jimmy Carter.

America’s citizenry are experiencing rising food and commodity prices, rising interest rates, falling home prices and stagnate wages and job growth. But so far Mr. Bernanke has only managed to bail out his buddies on Wall Street and in Washington. Maybe he just doesn’t realize that he is in the process of wiping out the middle class by destroying the value of our currency and rendering those without financial means, helpless to guard themselves against inflation. Too bad questions regarding the benefits of a sound currency  weren’t on his SAT exam.



Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Tags:  Ben Bernankecommodities
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China Rate Hike, Commodities, Inflation, & Debt Crisis
Posted by Staff on 12/27/2010 at 7:38 PM
Peter comments on China's rate hike, commodities, inflation, and the debt crisis

Tags:  Chinacommoditiesdebtgoldinflation
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Commodities, Dollar, Interest Rates, Chinese Inflation and U.S. deficits
Posted by Staff on 12/13/2010 at 3:01 PM
Peter comments on commodities, the dollar, interest rates, Chinese inflation, and U.S. deficits

Tags:  Chinacommoditiesdeficitsdollargoldinterest rates
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Dollar, Commodities, National Security, and Schiff haters
Posted by Staff on 10/12/2010 at 2:18 PM
Schiff  discusses the dollar value, commodities, national security, Schiff haters and more.

Tags:  commoditiesnational security
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