Dollar Quietly Losing Status as Safe Haven During Crisis

Eric Blair
Activist Post

It used to be that during times of perceived global crisis institutional investors rushed into the dollar as a safe haven. U.S. Treasury bonds were once considered as good as gold when uncertainty gripped the world. However, it now seems that the weight of fundamentals have finally surpassed prevailing perceptions where the dollar is no longer king of crisis investing.

In October, 2010, the dollar reached a 5-month low against the Euro during the fierce debate leading up to the $600 billion quantitative easing by the Fed.  Following the final passage of QE2 in early November, the mainstream media hyped it as victory and promptly pivoted to begin pounding out headlines about the Eurozone debt crisis.  Almost immediately the dollar turned the corner against the Euro.

2-month Dollar/Euro Chart 2010

It was easy to predict such a turnaround because perception at the time was clearly driving the currencies, while fundamentals were largely ignored.  As I pointed out in October:

The fundamentals suggest that it (the dollar) should be finished, but just as the world is about to declare it dead, miraculously a global storyline seems to emerge just when needed and foreign investors rush back in for 'safety.'

And, indeed, investors flocked back into the dollar on the hyping of the Eurozone debt crisis 2.0.  However, this cycle only lasted until the first week of January, 2011 where talk of the Euro crisis was noticeably absent from the headlines, and America's financial woes once again took center stage.

Now, as the world is gripped by authentic crises with mass civil unrest in the Arab world, and the devastating earthquake/tsunami in Japan, large institutional investors are continuing to abandon the traditional safe-haven dollar.

Bloomberg reported last week that "Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits."

Despite the global turmoil, the dollar hovers near its 52-week low on the Dollar Index.  Perhaps the timing of these crises coinciding with American lawmakers threatening a government shutdown over its escalating debt has deterred investors from their normal behavior.  Instead we are seeing far more money moving into commodities, as currencies and government debt are being increasingly exposed as unreliable.

The world seems to be finally realizing that commodities such as food staples and oil are the genuine currency of our society, and the only true safe haven during global uncertainty.  In fact, it appears that the fiat U.S. dollar is actually measured by oil (and other vital commodities), not the other way around.  As tangible and necessary resources, oil and food are now kings of the crisis.

RELATED by Eric Blair:
Economy Hit with the Ultimate Smokescreen: Biflation
5 Collapse-Proof Investments with Tangible Fundamentals




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Alaska Pipeline Closes, Oil Pushes $100 per Barrel

Drop in Production by BP, Others Threatens to Push Oil Toward $100 a Barrel

Guy Chazan
Wall Street Journal

BP PLC and other oil producers were forced to shut down nearly all their output on Alaska's North Slope, after a leak led to the closure of the Trans Alaska Pipeline.

Analysts said the shutdown of the 800-mile pipeline network could trigger a jump in oil prices unless the flow of oil resumes quickly, as the region represents a significant slice of domestic U.S. oil output. Some analysts said the disruption could help drive crude-oil prices toward $100 a barrel from below $90 now.

Alyeska Pipeline Service Co., which operates the pipeline network, said the spill has had no apparent ...

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7 Reasons Food Shortages Will Become a Global Crisis

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7 Reasons Food Shortages Will Become a Global Crisis

Activist Post 

Food inflation is here and it's here to stay.  We can see it getting worse every time we buy groceries. Basic food commodities like wheat, corn, soybeans, and rice have been skyrocketing since July, 2010 to record highs.  These sustained price increases are only expected to continue as food production shortfalls really begin to take their toll this year and beyond.

This summer Russia banned exports of wheat to ensure their nation's supply, which sparked complaints of protectionism.  The U.S. agriculture community is already talking about rationing corn over ethanol mandates versus supply concerns. We've seen nothing yet in terms of food protectionism.

Global food shortages have forced emergency meetings at the U.N. Food and Agriculture Organization where they claim "urgent action" is needed.  They point to extreme weather as the main contributing factor to the growing food shortages.  However, commodity speculation has also been targeted as one of the culprits.

It seems that the crisis would also present the perfect opportunity and the justification for the large GMO food companies to force their products into skeptical markets like in Europe and Japan, as recently leaked cables suggest.  One thing is for sure; food shortages will likely continue to get worse and eventually become a full-scale global food crisis.

Here are seven reasons why food shortages are here to stay on a worldwide scale:


1. Extreme Weather: Extreme weather has been a major problem for global food; from summer droughts and heat waves that devastated Russia’s wheat crop to the ongoing catastrophes from 'biblical flooding' in Australia and Pakistan.  And it doesn’t end there.  An extreme winter cold snap and snow has struck the whole of Europe and the United States. Staple crops are failing in all of these regions making an already fragile harvest in 2010 even more critical into 2011.  Based on the recent past, extreme weather conditions are only likely to continue and perhaps worsen in the coming years.

2. Bee Colony Collapse: The Guardian reported this week on the USDA's study on bee colony decline in the United States: "The abundance of four common species of bumblebee in the US has dropped by 96% in just the past few decades." It is generally understood that bees pollinate around 90% of the world's commercial crops.  Obviously, if these numbers are remotely close to accurate, then our natural food supply is in serious trouble.  Luckily for us, the GMO giants have seeds that don't require open pollination to bear fruit.

3. Collapsing Dollar: Commodity speculation has resulted in massive food inflation that is already creating crisis levels in poor regions in the world. Food commodity prices have soared to record highs mainly because they trade in the ever-weakening dollar. Traders will point to the circumstances described in this article to justify their gambles, but also that food represents a tangible investment in an era of worthless paper.  Because the debt problems in the United States are only getting worse, and nations such as China and Russia are dropping the dollar as their trade vehicle, the dollar will continue to weaken, further driving all commodity prices higher.

4. Regulatory Crackdown: Even before the FDA was given broad new powers to regulate food in the recent Food Safety Modernization Act, small farms were being raided and regulated out of business.  Now, the new food bill essentially puts food safety under the direction of the Department of Homeland Security where the food cartel uses the government to further consolidate their control over the industry. Militant police action is taken against farmers suspected of falling short on quality regulations. It is the power to intimidate innocent small farmers out of the business.

5. Rising oil prices: In 2008, record oil prices that topped $147 per barrel drove food prices to new highs.  Rice tripled in 6 months during the surge of oil prices, along with other food commodities.  The price of oil affects food on multiple levels; from plowing fields, fertilizers and pesticides, to harvesting and hauling.  Flash forward to 2011:  many experts are predicting that oil may reach upwards of $150-$200 per barrel in the months ahead.  As oil closed out 2010 at its 2-year highs of $95/bbl, it is likely on pace to continue climbing.  Again, a weakening dollar will also play its part in driving oil prices, and consequently, food prices to crisis levels.

6. Increased Soil Pollution: Geo-engineering has been taking place on a grand scale in the United States for decades now.  Previously known in conspiracy circles as 'chemtrailing,' the government has now admitted to these experiments claiming they are plan "B" to combat global warming.  The patents involved in this spraying are heavy in aluminum.  This mass aluminum contamination is killing plants and trees and making the soil sterile to most crops.  In an astonishing coincidence, GMO companies have patented aluminum-resistant seeds to save the day.

7. GMO Giants: Because of growing awareness of the health affects of GM foods, several countries have rejected planting them. Therefore, they would seem to need a food crisis to be seen as the savior in countries currently opposed to their products.  A leaked WikiLeaks cable confirms that this is indeed the strategy for GMO giants, where trade secretaries reportedly “noted that commodity price hikes might spur greater liberalization on biotech imports.” Since GMO giants already control much of the food supply, it seems they can also easily manipulate prices to achieve complete global control of food.

The equation is actually quite simple: food is a relatively inelastic commodity in terms of demand. In other words, people need to eat no matter how bad the economy gets.  Thus, demand can be basically measured by the size of the population. Therefore, as demand remains steady while the 7 supply pressures outlined above continue to worsen, food prices will have only one place to go -- up, up, and up.

As international agencies scramble to find "solutions," their energy may be just as well spent on questioning if this famine scenario is being purposely manipulated for profits.  Regardless, the average person would be very wise to stock up on food staples as an investment, and frankly to survive the worsening food crisis.

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Oil Hits 2-Year High After Supplies Drop More Than Forecast

Mark Shenk
Bloomberg

Crude oil rose to the highest level in more than two years after government reports showed that U.S. suppliesdropped and the country’s economy grew more than previously estimated in the third quarter.

Stockpiles fell 5.33 million barrels to 340.7 million last week, the Energy Department said. A 3.4 million-barrel decline was forecast, according to the median of 14 responses in a Bloomberg News survey. The Commerce Department said gross domestic product expanded 2.6 percent in the third quarter, up from a previous estimate of 2.5 percent.

“Today’s crude numbers were very bullish,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “The GDP numbers point to extended growth in the U.S. Previously, we were seeing economic and demand growth in China and emerging markets, now it’s spreading here.”

Crude oil for February delivery rose 66 cents, or 0.7 percent, to $90.48 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. Prices have climbed 14 percent this year.

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Remember $4 gasoline? Oil speculators are back

Kevin G. Hall
McClatchy Newspapers

WASHINGTON — Despite weak demand in the U.S. and Europe, oil prices climbed this week to near $90 a barrel and gasoline prices have passed $3 a gallon on the West Coast and parts of the Northeast.

Why? If demand is down and supplies are plentiful — and they are — why would prices be going up?

Because Wall Street speculators are driving up oil and gasoline prices again — just in time to dampen holiday cheer.

"It's all about investor optimism, and that's been the story about 2010 ... that's the primary reason why we're seeing oil prices at $90 (a barrel) and gasoline making an uncharacteristic climb in December towards $3 a gallon," said Troy Green, a national spokesman for the AAA Motor Club, which monitors gasoline prices.

AAA's Fuel Gauge Report shows the nationwide average for a gallon of regular unleaded gasoline stood at $2.968 on Wednesday. That's up 11 cents a gallon from a month ago and 33 cents a gallon over one year ago. That means it costs about $1.65 more per fill-up than a month ago and $4.95 more than a year ago.


It's even worse on the West Coast, where this week prices have averaged higher than $3.15 a gallon, according to Energy Department data.

If oil prices keep climbing beyond $100 per barrel, as Goldman Sachs projects for 2011, higher fuel prices may blunt efforts by the Obama administration and the Federal Reserve to stimulate the weak economy.

"I think we're at that point. With (nearly) 10 percent unemployment, it's a much more impoverished consumer that can't afford it. It's almost a bludgeoning instrument in terms of what it will do to consumer sentiment," said John Kilduff, a veteran energy analyst and partner in the hedge fund Again Capital. "What might have been a very bright shopping season could get the wind taken out of its sails by these high prices."

Rising prices could erase the stimulus coming from the 2 percentage point reduction in payroll taxes proposed this week by President Barack Obama and Republican congressional leaders. This would hit the working poor particularly hard.

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Crude jumps above $90 on cold snap, dollar

Reuters

NEW YORK - U.S. crude oil futures prices rose sharply on Tuesday, pushing above $90 a barrel for the first time in 26 months as cold weather boosting fuel demand and the dollar's weakness kept oil lifted.

Optimism that Ireland will pass an austerity budget on Tuesday helped lift the euro against the dollar.

U.S. stock futures were boosted by a deal struck by U.S. President Barack Obama with Republicans to extend Bush-era tax breaks for two years.

Northwest and northeast Europe are expected to continue to have below normal temperatures and above normal energy demand the next several days.

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Wheat-Crop Quality in Australia's Queensland Is Hurt by Rains, Growers Say

Wendy Pugh
Bloomberg

More than half of the wheat crop from Australia’s Queensland state may deteriorate to feed grade following heavy rain, tightening milling-quality supplies and potentially helping to extend a rally in prices.

“There is a lot of downgrading of quality because of the persistent wet weather,” Wayne Newton, grains president of Brisbane-based farm group Agforce, said today. The northern state may produce 1.6 million metric tons in all this season, according to a September forecast from the government.

Wheat surged 7.2 percent yesterday on concern that downgrades and delays to the crop from Australia, the fourth- largest shipper, may curb supply of high-quality grain. There was “a little bit of panic” in the market, according to Austin Damiani, a floor broker at the Minneapolis Grain Exchange.

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Dollar Begins Crash in Response to QE2 as Gold Scores New High

Kurt Nimmo
Infowars.com
November 5, 2010

Earlier this year, Lindsey Williams told Alex Jones the globalists would devalue the dollar and jack up the price of oil.

Due to Fed policy, the U.S. dollar is now at risk of crashing and consumers will soon be hammered with higher prices.

Both are now happening.

On Thursday, in response to the Federal Reserve’s announcement that it plans to monetize the debt and increase the money supply, economists and market strategists warned that the sickly U.S. dollar is now at risk of crashing and consumers will soon be hammered with higher prices.

“Consumers should prepare for another turn of events like the spring of 2008, when oil prices soared to $147 a barrel and gas at the pump was more than $4 a gallon,” Axel Merk, chairman and chief investment officer of Merk Investments, of Portland, Maine, told CNBC.

Oil futures reached $87.22, the highest price in more than two years, Bloomberg reports this morning.

Merk said the Fed’s plan for inflation will show up at the gas pump. “We’re not going to get wages to go up. We’ll get the price at the gas pump to go up instead,” he said.

The Fed’s Q2E plan is being roundly condemned. China, Germany and Brazil are warning that the plan to inject more than $600 billion of funny money created out of thin air into the economy will have disastrous consequences. It will send money flooding into their markets seeking higher returns and that will drive up exchange rates and hamper exports by making their goods more expensive.

China’s central bankers are not ebullient. “If the domestic policy is optimal policy for the United States alone, but at the same time it is not an optimal policy for the world, it may bring a lot of negative impact to the world. There is a spillover,” said Zhou Xiaochuan, governor of the People’s Bank of China.

Investors are scampering in search of shelter. “There’s no such thing anymore as a safe asset. Cash is no longer safe,” said Merk. “Do what central banks do, they diversify to baskets of currencies.”

Gold, silver, and precious metals remain a strong diversification option.

On Friday, gold futures shot up higher and posted a new record, their second in a row and a day after the metal had its biggest one-day gain in nearly 20 months. Gold rallied to $1,383.10 an ounce on Thursday after the Federal Reserve announced its policy to attack the dollar and unleash a broadside on the world economy through its QE2.

–

Kurt Nimmo edits Infowars.com. He is the author of Another Day in the Empire: Life In Neoconservative America.

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Is the world running out of food, alongside oil, metals, water and much else?

The Fed is fuelling the catastrophe of fast rising raw material prices

Jeremy Warner
Telegraph

The answer to this question, according to a recent OECD and UN Food and Agriculture Organisation report is a definitive no; global agricultural production is on track to satisfy the expected long-term increase in demand, the OECD reckons.

Yet it's little thanks to public policy, which in combination with the current craze among financial speculators for commodities, seems hell bent on driving up prices to what for millions of the world's poor may be starvation levels.

There are two main ways in which policymakers are insidiously interfering with the usual rules of supply and demand for raw materials, and myriad different smaller ones. We'll leave aside the smaller ones, such as China's attempt to leverage its monopoly of rare earth metals for geo-political purposes, and concentrate instead on the two biggies.

One is the policy of ultra-cheap money in advanced economies to fight the economic crisis; and the other, more commodity-specific one, is massive public subsidy for the production of bio-fuels. Food is being elbowed out by pursuit of "clean fuel".


As long as the US Federal Reserve remains accommodative, commodity prices are likely to keep rising. We are not yet back to anything like the extremes seen in the bubble of 2007/8. Oil prices at $140 a barrel, it will be recalled, were what helped tip the world economy into recession. Yet by long-run historic standards, both food and mineral prices are still exceptionally elevated and going higher.

The underlying reasons are well known. Rapid industrialisation and urbanisation in the developing world has created a "super-cycle" that won't ease until these countries bump up against the limits of their growth potential. Most would agree there's some way to go.

Into this already troubling mis-match between growing demand and finite supply stumbles the US Fed with a loose money policy of unprecedented proportions.

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10 Reasons Our Shallow Water Supply is in Deep Trouble
Banksters Inflate Speculative Food Bubble, UN Offers Global Governance Solution

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The Food Crisis of 2011

Addison Wiggin

Forbes

Every month, JPMorgan Chase dispatches a researcher to several supermarkets in Virginia. The task is to comparison shop for 31 items.

In July, the firm’s personal shopper came back with a stunning report: Wal-Mart had raised its prices 5.8% during the previous month. More significantly, its prices were approaching the levels of competing stores run by Kroger and Safeway. The “low-price leader” still holds its title, but by a noticeably slimmer margin.

Within this tale lie several lessons you can put to work to make money. And it’s best to get started soon, because if you think your grocery bill is already high, you ain’t seen nothing yet. In fact, we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory.

Fact is,  the food crisis of 2008 never really went away.

True, food riots didn’t break out in poor countries during 2009 and warehouse stores like Costco didn’t ration 20-pound bags of rice…but supply remained tight.

Prices for basic foodstuffs like corn and wheat remain below their 2008 highs. But they’re a lot higher than they were before “the food crisis of 2008” took hold. Here’s what’s happened to some key farm commodities so far in 2010…

• Corn: Up 63%
• Wheat: Up 84%
• Soybeans: Up 24%
• Sugar: Up 55%

What was a slow and steady increase much of the year has gone into overdrive since late summer. Blame it on two factors…

• Aug. 5: A failed wheat harvest prompted Russia to ban grain exports through the end of the year. Later in August, the ban was extended through the end of 2011. Drought has wrecked the harvest in Russia, Ukraine and Kazakhstan – home to a quarter of world production.

• Oct. 8: For a second month running, the Agriculture Department cut its forecast for US corn production. The USDA predicts a 3.4% decline from last year. Damage done by Midwestern floods in June was made worse by hot, dry weather in August.

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Banksters Inflate Speculative Food Bubble

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Oil climbs as dollar sags

Associated Press

NEW YORK — Oil prices climbed on Monday as the dollar fell against the euro and other currencies. Benchmark crude rose 91 cents to $82.60 a barrel in midday trading on the New York Mercantile Exchange.

Gas pump prices were virtually unchanged from Sunday, at a national average of $2.813 for a gallon of regular. That's about two cents below a week ago and almost 15 cents higher than a year ago. Drivers in western states, North Dakota and New York are paying the most, with pump prices above $3 a gallon. The lowest prices are found across most of the South, as well as Missouri and Oklahoma.

The dollar lost ground against the euro and fell to a 15-year low against the yen. That follows what JP Morgan analysts called a "rather bland" statement from the weekend G-20 meeting that said exchange rates should be determined by markets. "This is certainly nothing new, and the reality is currencies will continue to take a back seat to domestic priorities."

Oil prices tend to rise as the dollar falls, because oil is priced in dollars and becomes more attractive to holders of foreign currencies.

The G-20's lack of a firm position on currency devaluation makes it more likely that the Fed next month will announce more action to bolster the U.S. economy, possibly buying government securities, which will inject more money into the system. That's likely to weaken the dollar further and support higher oil prices.

It's not all about the dollar. Energy consultants MF Global said in a note to investors that "steady demand for raw materials from China and India are supporting oil. Additionally, industrial strikes in France, sparked by the government's plan to raise the retirement age have shut 11 refineries cutting gasoline production."

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