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Inflation Expectation Tuesday: Obama, Please Earmark $200 in the Budget for “Fed Research” so Bernanke Can Get a StockCharts Account

Courtesy of Phoenix Capital Research

Growing up, I always assumed that people in a position of power or authority got there based on merit. It never crossed my mind that someone might actually be in charge of something VERY important like, say, the monetary system, and NOT know what he or she was doing. 

After all, the US has created a system for verifying if you’re an expert or not, hasn’t it? If you have an advanced degree, especially from a prestigious school, then you should know what you’re talking about, right? And if you not only graduated from a prestigious school but actually TAUGHT at one for decades… well then you’ve GOT to be an expert, right?

After all, you literally have been PAID to study and think for your entire adult life.

I only ask all of this, because according to Fed Chairman Ben Bernanke, the Fed sees little risk of inflation occurring in the US at this time. This is rather staggering given that ANYONE with access to the Internet (forget the education and degree) could gain access to charts that clearly show the US is heading towards, if not ALREADY IN, an inflationary storm.

Below is a chart of the US Dollar. I got this chart from a research tool called stockcharts.com. It costs about $180 ($15 per month). However, this same image can be culled from numerous free sources. So if budgetary restraints forbid ear-marking $200 for “research” at the Fed, a quick visit to Bigcharts.com or Yahoo! Finance should do the trick.

As you can see, the US Dollar has fallen from about 88 to 76 in the last six months. That’s a 13% decline… in six months. I realize this might be hard for those who don’t look at charts too often so I’ve annotated things so it’s easy to grasp.

Now, I DON’T have a PhD in Economics from Harvard, but it seems pretty obvious to me that when the currency in which assets are priced loses value, the prices of assets denominated in that currency will rise… which is inflation.

Now if only there were a tool for visualizing the price of various assets…

Surprise! Stockcharts has this one too! The below chart is for the Jeffries Commodities index (a basket of commodities or hard assets). As you can see, while the US Dollar has fallen, these prices have RISEN.

Of course, this means that when you lump together ALL commodities, their prices are generally rising. I realize this is pretty out there as far as economic research goes. So let’s try to make things more concrete and “close to home.”

The below chart shows the price of agricultural commodities over the last year. Agricultural commodities are things like wheat, soybeans, cotton, orange juice, and coffee. Human beings use these materials to create things like food and clothing, which they need to survive on Earth. 

As you can see, the prices of agricultural commodities are rising. Because of this, the cost of food will… RIIIIIISE. So will the cost of making clothing. This means humans will have to spend MORE money to buy the SAME amount of FOOD and CLOTHING… which is innnnnflation.

We’ve already covered a lot of ground in this research, but I’ve saved the best for last.

You see, there’s one commodity which is VERY important for the US economy. It’s called oil and it’s used to make our cars go VROOM!  Just as importantly, oil is used by truck companies to ship food and other goods around the US.

I mention all of this because the price of oil is also… going up!

In closing, I know this research isn’t presented in the usual academic format. As such it may not be ivy-league material. However, on planet earth, the cost of commodities is an important gauge for inflation. The same goes for the value of the US Dollar. If the US Dollar falls and prices rise, then you are experiencing inflation.

Which, as the above charts show, we are experiencing NOW. Forget risk of it happening. It is happening right now. Today.

On a closing note, I know I’ve been as vocal a critic of the Government’s spending as anyone, but I personally would not mind if Obama and pals want to earmark an additional $200 in the 2011 National Budget for “Fed Research.” I assume once Ben Bernanke and the rest of the folks at the Fed get ahold of this incredible charting technology, they’ll be better able to monitor how the world operates and make better forecasts.

After all, that’s how research works, right?

Good Investing!

Graham Summers 

PS. If you’re worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.


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