More Investors Position for Possibility of U.S. Default

The net notional amount of derivatives used to hedge or speculate against a default on U.S. government debt rose 12% in late January, according to Depository Trust & Clearing Corp. figures.

The increase suggests investors are becoming more nervous about the quality of U.S. debt. It also threatens to cast a pall over the notion that Treasurys are risk-free assets investors should run to for haven from other instruments.

The net notional of credit default swaps bought and sold on U.S. debt rose from $2.67 billion to just over $3 billion between Jan. 14 and Jan. 21, ...

http://online.wsj.com/article/SB10001424052748704775604576119960455333704.html

Fed chief Ben Bernanke denies US policy behind record global food prices

Ben Bernanke, the chairman of the US Federal Reserve, has dismissed the idea that the central bank’s policies are to blame for the rise in global food prices to a record high that helped trigger political unrest in Egypt.

Mr Bernanke said that the rapid growth of developing economies was behind the increase in food prices, rather than the Fed’s decision to embark on a second, $600bn (£371bn) round of printing money. “Clearly what’s happening is not a dollar effect, it’s a growth effect,” Mr Bernanke said in a rare question and answer session with journalists at the National Press Club in Washington on Thursday.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8302111/Fed-chief-Ben-Bernanke-denies-US-policy-behind-record-global-food-prices.html#

Fed denies policy is causing food rises

Asset purchases by the US Federal Reserve do not cause rising food prices in countries such as Egypt, the central bank’s chairman Ben Bernanke said on Thursday.

“I think it’s entirely unfair to attribute excess demand pressures in emerging markets to US monetary policy, because emerging markets have all the tools they need to address excess demand in those countries,” he said.

Mr Bernanke’s comments are a firm retort to critics who argue that by driving down US interest rates with quantitative easing the Fed is pushing capital flows into commodities and emerging markets.

http://www.ft.com/cms/s/0/5c4aeaea-2fbd-11e0-91f8-00144feabdc0.html#axzz1CztEsxVR

Companies Stock Up as Commodities Prices Rise

Companies contending with rising commodity prices are stockpiling rubber tires, cotton clothing and other goods, a maneuver that is aimed at insulating them from inflation but also could contribute to it.

John Anton, founder of Anton Sports, with his surplus supply of cotton T-shirts in Tempe, Ariz., last month.
Spice-maker McCormick & Co. stocked up on some ingredients and Monro Muffler Brake Inc. bought extra tires and motor oil, assuming prices of those goods will keep rising. Anton Sport, a small athletic-wear wholesaler in Tempe, Ariz., amped up its fabric purchases to avoid higher prices.

These pre-emptive purchases are a fraction of overall business activity, but the trend is being watched by economists and business executives. The stockpiling comes at a pivotal moment for the global economy, as central bankers scramble to judge the impact of raw-materials price increases and figure out whether or when to raise interest rates.

http://online.wsj.com/article/SB10001424052748704775604576120533736097682.html?mod=WSJ_hp_LEFTTopStories

U.S. economy, inflation, China, euro, gold

U.S. Inflation Could Rise Twentyfold

Are We Seeing a Whiff of Inflation?

Economists are pointing out that January's super strong ISM manufacturing report could be signaling early signs of inflationary pressure.

The prices paid index jumped to 81.5 from 72.5, the highest level since 2008, when oil was spiking in the mid-$140s per barrel. In November, prices paid was at 69.5.

http://www.cnbc.com/id/41370200

Four Reasons Why The Government Is Destroying The Dollar

1. Creating money out of thin air on a massive basis is all that stands between the current state of hidden depression, and overt depression with unemployment levels in excess of those seen in the US Great Depression of the 1930s.

2. It is the weapon of choice being used to wage currency war and reboot US economic growth.

3. It is the most effective way to meet not just current crushing debt levels, but to deal with the rapidly approaching massive generational crisis of paying for Boomer retirement promises.

4. Political survival and enhanced power for incumbent politicians.

http://www.financialsense.com/contributors/daniel-amerman/four-reasons-why-the-government-is-destroying-the-dollar

Authoritarian governments start stockpiling food to fight public anger

Commodities traders have warned they are seeing the first signs of panic buying from states concerned about the political implications of rising prices for staple crops.

However, the tactic risks simply further pushing up prices, analysts have warned, pushing a spiral of food inflation.

Governments in Asia, the Middle East and North Africa have recently made large food purchases on the open market in the wake of unrest in Tunisia which deposed president Zine al-Abidine Ben Ali.

http://www.telegraph.co.uk/news/worldnews/middleeast/8288555/Authoritarian-governments-start-stockpiling-food-to-fight-public-anger.html

The downsizing of America-manufactures learn creative methods of repackaging inflation.

There is a slow burn going on and it is happening in your wallet and also in the gas tank of your car. The US Treasury and Federal Reserve have made it their mission to slowly cut the value of each one of those green dollars you have. Since many Americans are struggling to make the monthly bills, many producers realize that they cannot up the price on regularly bought consumption products.

http://www.mybudget360.com/downsizing-of-america-oil-production-off-1980s-peak-repackaging-inflation-decline-us-dollar-purchasing-power/

Why the Smart Money is Trading Dollar Bills for Hard Assets

“With each passing day,” we observed last week, “inflation seems less and less a theoretical fiction, and more and more a genuine threat… No self-respecting economist or self-aggrandizing central banker is acknowledging any inflationary risk whatsoever,” we continued. “But the indifferent data points of real-world prices testify to the contrary.”

http://dailyreckoning.com/why-the-smart-money-is-trading-dollar-bills-for-hard-assets/

Silver Shortage This Decade, Silver Will Be Worth More Than Gold

A Silver Shortage?

The Most Predictable Financial Calamity in History

In November 2010, the Federal Reserve announced a second round of economic stimulus commonly referred to as Quantitative Easing (QE2). The reason, according to the Fed, was “progress toward its objectives has been disappointingly slow.” So, to try and turn the economy around, the Fed said, “. . . the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter (June) of 2011, a pace of about $75 billion per month.” QE means the Fed basically creates money out of thin air to buy debt. The current money printing orgy is financing more than half of U.S. government right now. The first round of QE bought toxic mortgage debt and bailed out the bankers.

http://usawatchdog.com/economic-stimulus-quantitative-easing-qe3/

Dead ahead: State and city pension Failures

Last week The New York Times dropped a bombshell, reporting that "policy makers are working behind the scenes to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers."

This is truly huge news, with far-reaching consequences. But it shouldn't come as a surprise if you've been reading my columns ...

http://beforeitsnews.com/story/375/477/Dead_ahead:_State_and_city_pension_FAILURES.html

Second wave of housing bust hammers more cities

A second wave of falling home prices is battering some cities that had escaped the worst of the housing market bust.

Prices in Seattle, Charlotte, N.C., and Portland, Ore., have hit their lowest points since peaking in 2006 and 2007. Denver and Minneapolis are nearing new lows. High unemployment and rising foreclosures are taking a toll even on markets that never overheated during the boom years.

Home values are dwindling in nearly every American market. Prices fell in November in all but one of the 20 cities in the Standard & Poor's/Case-Shiller index released Tuesday. Eight of those markets hit their lowest point since the housing bubble burst.

http://finance.yahoo.com/news/Second-wave-of-housing-bust-apf-411171723.html?x=0

Gold Holdings in ETPs Plunge Amid Signs of Recovery

Gold held through exchange-traded products, or ETPs, tumbled by the most in more than two years amid speculation that improving prospects for the global economic recovery are undermining demand and hurting prices.

Assets in gold-backed ETPs fell 31 metric tons yesterday to 2,043.09 tons, the lowest level since Aug. 10, according to data compiled by Bloomberg from 10 providers. That’s the biggest drop in percentage terms since October 2008, the data show. Holdings have shrunk 3.4 percent from the record 2,114.6 tons on Dec. 20.

http://www.bloomberg.com/news/2011-01-26/gold-assets-in-etps-plunge-most-since-2008-amid-signs-of-global-recovery.html

Finally, It’s the Fed That Has Become Too Big to Fail

We’re still not sure whether CNBC was making a joke or simply advertising its ignorance with a recent headline, “Accounting Tweak Could Save Fed from Losses,” This was a tweak about as subtle and ingenuous as Bernie Madoff’s balance sheet.

http://news.goldseek.com/RickAckerman/1295938860.php

An Ugly Side Effect of New 1099 Law: More Tax Evasion

Tax pros now fear that tax evasion could go viral if the health-reform bill’s new 1099 requirement takes effect next year. They say more small businesses will likely opt to do all-cash transactions under the table to avoid the 1099 reporting requirement, and all of its onerous provisions, which are worse than small businesses may realize.

That's the direct opposite effect of what lawmakers had hoped for, and it would pose a bad development for the Internal Revenue Service, which for years has been under pressure from Congress to bring in more tax revenue. That revenue is needed now more than ever, as Social Security and Medicare teeter into the red, and as more states rely on federal revenue to fill their budget holes.

http://www.foxbusiness.com/markets/2011/01/21/new-ugly-effect-tax-evasion/#

Higher pump prices coming your way this spring

Pump prices have risen nearly 9 percent since Dec. 1 and topped $3.10 a gallon this week. That's the highest level since October 2008. The price may rise or fall a little over the next few months, but analysts expect it to range between $3.20 and $3.75 gallon by March and April ahead of the summer driving season.

http://finance.yahoo.com/news/Higher-pump-prices-coming-apf-1797090788.html?x=0