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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Richard Russell
May 16, 2011
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I've written about the international over-production of merchandise and goods due to the entrance of China and Asia into world markets. These are all export-dependent countries, and they eager to sell their goods to the so-called developed nations. The ironic fact is that the world simply can't use or digest all the goods that are being created. The net result is worldwide deflationary pressures.

This deflationary pressures have been disguised by the Fed and the central banks of the world as they fight deflation by producing a sea of currencies. It's currency inflation (actually devaluing) matched against the pressure of deflation.

I said at the beginning of the 2008 collapse, "Let it go, let the natural forces work themselves out. It's better to take the medicine now". That would have been painful, but it would have cleaned out the "wound" (i.e. the sick, over-leveraged economy). But Bernanke knew better. He was convinced that it the Fed created enough new money, the pain of a deflationary collapse could be avoided. Bernanke was steeped in his studies of the great Depression. At one time he actually apologized for the Fed's "mistakes" during the 1930s.

To combat deflation, Bernanke created quantitative easing (QE1), and when it didn't do the job, he turned to a second session of easing -- QE2. The ocean of newly created currency worked -- on stock prices and on commodity prices. But it didn't cure the housing problem and it didn't create a convincing upturn in new jobs.

Now we have a strange situation. The worldwide fundamental pressure of deflation is still operating on housing, and on the middle and on the lower classes and on employment. No amount of money printing seems to be able to turn the economy around in a convincing way.

Over recent weeks, we had a commodity scare. It was triggered when silver broke following a wild speculative orgy. Oil broke, copper broke, commodities broke, and I suspect the back of the inflation-speculation frenzy was broken.

As I write, the stock market is lower, Treasuries are higher, oil is a bit higher, copper is higher, commodities in general are unchanged. I suspect that the markets are "thinking" that the Fed cannot halt its printing operations. To halt money creation would be to give in to the world forces of deflation. "Dr. Copper" is slightly lower. July crude, is wavering, but holding just below 100.

The Fed keeps telling us that they can control the forces of inflation. But the Fed's real fear is deflation, and the whole situation has placed the Fed in a quandary. If they continue to print, food and energy prices push higher. If they halt their printing, deflation immediately enters the picture.

I watch the CRB Commodity index closely for indications of inflation or deflation. The chart below shows the CRB Index breaking sharply below its 50-day MA, but holding well above its 200-day MA. The index is oversold, and I suspect it near to halting it's decline.

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