There seem to be plenty of lamebrains that think that the federal government
sending out US$168 billion in "tax rebate economic stimulus" checks to various
people, for no reason at all, is some hot idea that is going to somehow
magically save the American economy.
Instead of calling these people names like "moron", "stupid moron" or "big,
dumb, poopie-head moron" like they deserve, I merely motion to Boris Sobolev of
ResourceStockGuide.com to tell you that "the worst in the economy is not yet
over, especially if one recalls just a couple of important facts from a very
long list of economic headwinds: (1) Gasoline and heating oil prices are at
their all-time-highs, while (2) household debt is 85% higher than it was in
2001, the year we received our first rebate checks from the government." Yikes!
85% higher debt in seven years!
And it is not just energy that is costing more, but Ambrose Evans-Pritchard at
Telegraph.co.uk writes that everything is costing more, everywhere, and
"Argentina has inflation that is running at about 25%, even though the official
Consumer Price Index (CPI) is 8.9%", which is plenty bad enough, but that he
goes on "Among the CPI rates - if you believe them - are: Ukraine (30%),
Venezuela (29%), Vietnam (25%), Kazakhstan (19%), Latvia (18%), Qatar (17%),
Pakistan (17%), Egypt (16%), Bulgaria (15%), Russia (14%), the Emirates (11%),
Estonia (11p%), Turkey (9.7%), Indonesia (9%), Saudi Arabia (9.6%), Romania
(8.6%), China (8.5%) and India (7.6%)."
I am staggered by all of this inflation, and in desperation I turn to Jeff
Rubin of CIBC World Markets, who says that their new report says, "Exploding
transport costs may soon remove the single most important brake on inflation
over the last decade - wage arbitrage with China."
How "exploding" are these transport costs? Well, the report finds that "the
cost of shipping a standard 40-foot container from East Asia to the North
American east coast has already tripled since 2000 and will double again as oil
prices head towards US$200 per barrel." Double!
The report notes that "it currently costs US$8,000 to ship a standard 40-foot
container from Shanghai to the North American east coast, including in-land
transportation. That's up from just US$3,000 in 2000 when oil was US$20 per
barrel. At US$200 per barrel of oil, the cost to ship the same container is
likely to reach US $15,000."
To see how this is reflected in prices, Mr Rubin says, "To put things in
perspective, today's extra shipping cost from East Asia is the equivalent of
imposing a 9% tariff on East Asian goods entering North America. And at oil
prices at US$200 per barrel, the tariff equivalent rate will rise to 15%."
I know what you are thinking. You want to know how in the hell you can afford
to buy anything if prices are raised another 15% just for transportation costs,
and if things are as bad as I say, why aren't people screaming mad, barricading
themselves in their homes, putting "no trespassing" signs all over the yards
and buying gold and silver?
Well, as to the first question, I rudely reply that I don't expect you to buy
anything since I can't afford to buy anything, either, you greedy,
self-absorbed little snot; and furthermore I am (now that you mention it)
screaming mad; I'm barricaded in my house; there are a zillion "Trespassers
will be shot!" signs all over the yard; and I am buying gold and silver with
every dime I can steal from my wife's purse or the kids' piggy banks.
And some others are apparently catching onto that gold idea, too, as
GoldenSextant.com reports, "Another intriguing development of the past few
months is the resumed outflow of foreign earmarked gold from the United States.
From the end of 2003 through January of this year, there was virtually no
change in the total amount of gold held under earmark at the New York Fed for
foreign and international accounts, mostly foreign central banks. However, from
February through September, the latest month for which figures are available,
these accounts are down by a net 169 tonnes, from $8,967 to $8,737 million at
$42.22/ounce, or from 6,606 to 6,437 tonnes."
But excitingly, if you like the idea that there has to be a lot of buying of
gold in the future, even as the amount of Federal Reserve gold is going down,
that the derivatives industry have made a monster that will devour them, as
"The reported figures indicate that the mountain of gold options now almost
certainly exceeds 30,000 tonnes - an amount roughly equal to the world's total
claimed official gold reserves."
So all the gold in the world is owned twice over? Hahaha! I smell a short
squeeze a-coming, which will be wonderful for those holding real gold! Whee!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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