Alex’s notes: This is an outstanding article on inflation. Understanding what inflation truly is holds the key to understanding what is happening in our economy, and how wealth will be transferred to a select few over the next decade.

Inflation Is Baked Into the Cake
By David Galland
17 Mar 2008 at 03:45 PM GMT-04:00

STOWE, Vt. (Casey Research Advertorial) — The word “inflation” covers two different concepts, and it’s important to keep them separate. One concept is monetary inflation, which is when the supply of money increases faster than the supply of goods and services. The other concept is price inflation, which is an increase in the overall level of prices for goods and services.

The relationship between the two is the relationship of cause and effect. Monetary inflation causes price inflation. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that is causing it. And so they tend to blame the producers of goods and services for higher prices - rather than the money-creating government that is the true culprit.

And make no mistake, as government spending continues on a steep ascent, piling up debt, there is no question that the government has to continue creating money like there’s no tomorrow. This situation is not unique to the U.S. Quite the opposite: the adoption of fiat monetary systems is now universal.

The results of over three decades of unhindered monetary creation are increasingly being felt in a rising tide of price inflation, whether it be the 7.4% increase in producer prices reported by the U.S. in the most recent quarter, or the news just out of China that consumer price inflation now tops 8% and is worsening … or, in the most extreme example, Zimbabwe, where the utter lack of restraint by an insane dictator now burdens that economy with an inflation rate of over 100,000% annually.

The Casey Research Global Inflation Survey

To get a better sense of things, Casey Research recently conducted a survey of the world’s top 30 economies, broken down on a region-by-region basis. The snapshot below offers a glimpse at the big picture.

Commodities on the Rise

Most pundits focus on commodities as a central culprit in today’s higher price inflation. Why are commodity prices rising? There are many reasons, most importantly: supply and demand fundamentals, speculation and a weakening U.S. dollar, the “universal currency” in which oil, gold and many other commodities are priced.

Of those factors, supply and demand and speculation are fairly fluid. Which is to say they can vary over time based on politics (a threat to cut off oil sales by Venezuela, a war in the Middle East, legislation favouring biofuel production) or for more technical reasons (power shortages impacting mining in South Africa, or the shutdown of the Gulf of Mexico during a hurricane). This relatively short-term variability largely neutralizes the value of these factors as predictors of future inflation. Simply put: who can know the unknowable?

Instead, we look to longer-term trends. In that regard, two are apparent. The first has to do with the concept of “peak” commodities. While it has been Marion King Hubbert’s theory of Peak Oil that has received the most attention, credible arguments can also be made for peak metal (the dearth of major new discoveries), and even peak food. While these arguments have merit, they were beyond the scope of our survey, other than noting them as potentially rising in significance over time.

The second long-term trend is, in our view, of immediate consequence and worth a more detailed discussion: per above, the limitations and risks inherent in the fiat monetary systems now in universal favour around the world. It is this fiat monetary regime – the attempt to manage monetary policy based on flexible guidelines, and without the anchor previously provided by a gold standard – that we believe is the single most important driver of the rising price inflation now apparent around the world.

Losing Control

Simply, while the central banks of a handful of countries are (just) managing to contain inflation through restrained monetary and fiscal policy, the vast majority are finding the task politically inexpedient and are losing control. While we may point with some well-deserved derision at Mr. Mugabe’s comedic attempts to paper over his inflation with yet more paper, all nations are currently making the same errors, albeit at differing levels of failure.

To understand this point, we share a simple but accurate way of thinking about inflation as the result of too much money chasing too few goods. On that front, the chart just below paints a picture of the largely unfettered global growth in money since the early 1970s plotted against industrial production, a proxy for “goods” in their many varieties.

That chart begins to get under the hood of the problem, but one further view is necessary to understand what happened in the early 1970s that unleashed the tidal wave of money. The chart below presents a ratio of the above two measures, and includes a marker indicating President Nixon’s cancelling of the link between the U.S. dollar and gold in 1971 as the likely trigger. Once this anchor was removed, all that remained was a pure fiat monetary system.

While cancelling the gold standard was a U.S. policy decision, its impact was felt around the world. That is because of the historic Bretton Woods agreement struck between representatives of over 40 countries in 1944, as World War II came to an end.

Leveraging its position as “last man standing” following the devastating war, the U.S. pushed forward a wide-ranging set of agreements - the net result being that, from that point forward, the U.S. dollar would be the de facto global reserve currency, with all the nations of the world pegging their currencies to the dollar. New institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development, were fathered at Bretton Woods, but they were nothing more than enforcers for the new regime, ensuring that the other countries stayed in line, buying and selling dollars as needed to maintain a stable peg.

For its part, the U.S. guaranteed gold convertibility at $35 “forever.”

But as is inevitable when dealing with governments, “forever” really means “for as long as it is politically expedient.” When it became inconvenient, in the late 1960s when the French under Charles de Gaulle decided that they’d prefer to have the gold, Nixon cancelled convertibility.

Once President Nixon cancelled that convertibility, which took effect in 1971, the world’s central bankers, left with no other immediately obvious or more viable alternative, continued using the U.S. dollar as a key component of their reserves. It also continued to be used in international trade, to price globally traded commodities, such as oil. Yet the end of gold convertibility represented a fundamental change; from that point forward the creation of U.S. dollars and, by extension, all of the world’s currencies, was restrained by nothing more than political expediency.

It is our contention that the size of the politically motivated governmental spending, spending which has no “hard” limiting factor or defined discipline, will continue apace and, in fact, significantly worsen due to compounding interest on government borrowing and the coming wave of irrevocable social commitments – on Social Security and Medicare in the U.S., for example. Against the backdrop of a global fiat monetary regime, the only limitation to government spending is that which the politicians believe will be politically unacceptable to a population. This is, generally speaking, no real limitation at all, given that the public is now apathetic about, and numb to, the real world implications of large numbers.

Inflation: Baked in the Cake

In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our “Global Inflation Survey,” we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.

As investors, that keeps us focused on gold, the world’s longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies. This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening U.S. dollar, and is now affecting fiat currencies around the world, almost without exception.

Are we seeing the end of the experiment in fiat monetary systems? It’s too early to say one way or another, but it’s not too late to shift at least some percentage of your portfolio into gold and, for leverage, gold shares.

© Casey Research, LLC. 2008

David Galland is the managing director of Casey Research. The above was excerpted from the Casey Research Global Inflation Survey. The full 38-page survey, which includes commentary by Casey Research Chairman Doug Casey and an interview on the inflation/deflation debate with Casey Research Chief Economist Bud Conrad, is available on request.

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Thanks in part to a large US trade deficit and a weak US economy, the US dollar continues to trend lower. For some perspective, today’s chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). As today’s chart illustrates, the performance of the US dollar has varied inversely to that of gold since October 2005. It is worth noting that the US dollar is currently testing support.
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Buy Gold and Silver Bullion

By Paul Craig Roberts
March 13, 2008

I’ve been watching the dollar die all my life. I sometimes think I will outlast it.

When I was a young man, gold was $35 an ounce. Today one ounce gold bullion coins, such as the Canadian Maple Leaf, cost more than $1,000.

Our coinage was silver. Our dimes, quarters, and half dollars had purchasing power. Even the nickel could purchase a candy bar, ice cream cone or soft drink, and a penny could purchase bubble gum or hard candy. If a kid could collect 5 discarded soft drink bottles from a construction site, the 2 cents deposit on the returnable bottles was enough for the Saturday afternoon movie. Gasoline was 32 cents a gallon. A dollar’s worth was enough for a Saturday night date.

Our silver coinage was 90% silver. People sometimes melted coins in order to make silver spoons, known as coin silver, which can still be found in antique shops. Except for the reduced silver (40%) Kennedy half dollar which continued until 1970, 1964 was the last year of America’s silver coinage. The copper penny departed in 1982. As Assistant Secretary of the Treasury, I opposed the demise of America’s last commodity money, but I couldn’t prevent the copper penny’s death.

During World War II (1941-1945), nickel was diverted from coinage to war, and the US mint issued a wartime silver (35%) nickel.

It is not easy to find items to purchase with today’s US coins, but the silver coins of the same face value still have purchasing power. The 10 cent piece of my youth contains $1.42 worth of silver at today’s silver price. The quarter is worth $3.55, and the half dollar contains $7.10 of silver. The silver dollar is worth 15.2 times its face value. These are just the silver values of coins that might be worth far more depending on condition and rarity. The silver in the wartime nickel is worth $1.10, which is 22 times the coin’s face value. Even the copper penny is worth 2.5 cents.

When I was a young man enjoying travels in Europe, the German mark or Swiss franc traded four to one US dollar. The euro, which is today’s equivalent to the mark or franc, costs $1.55.

People who haven’t accumulated much age have little idea of the corrosive power of “acceptable” inflation. Unlike gold and silver, fiat money has no intrinsic value. When money is created faster than goods and services it drives up prices, thus driving down the value of the money. If freely traded currencies are excessively printed or if inflation, budget deficits, and trade deficits drive currencies off their fixed exchange rates, prices of imports rise as the foreign exchange value of the currency falls.

Today the US, heavily dependent on imports, is subject to double-barrel inflation from both domestic money creation and decline in the dollar’s foreign exchange value.

The US inflation rate is about twice as high as the government’s inflation measures report. In order to hold down Social Security payments, the government changed the way it measures inflation. In the old measure, inflation measured the nominal cost of a defined standard of living. If the price of steak rose, up went the inflation rate. Today if the price of steak rises, the government assumes that people switch to hamburger. Inflation doesn’t go up. Instead, the standard of living it measures goes down.

This is just one of the many ways that the government pulls the wool over our eyes.

With the dollar value of the euro rising through the roof, today a vacation in Europe is far more costly than in the past. Thanks to China, so far Americans have been sheltered from the greatest effects of the dollar’s declining value. Our greatest trade deficit is with China. The prices of the goods from China have not risen, because China keeps its currency pegged to the dollar. As the dollar goes down, China’s currency goes with it, thus holding down price rises.

The resignation of Admiral William Fallon as US military commander in the Middle East probably signals a Bush Regime attack on Iran. Fallon said that there would be no US attack on Iran on his watch. As there was no reason for Fallon to resign, it is not farfetched to conclude that Bush has removed an obstacle to war with Iran.

The US is already over stretched both militarily and economically. An attack on Iran is likely to be the straw that breaks the camel’s back.

Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.

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Alex’s Notes: Its been an exciting week, as we watch multiple historic events unfold before our eyes. Of course one of the biggest headlines is that gold has passed the $1000 per ounce barrier, which makes the DOW / Gold Ratio 11.927:1 as of close of market Friday.

History shows us that we have further to go to meet parity, yet we can expect some kind of large pullback, perhaps as much as 30% of the spot price before gold again kicks into gear and heads to $1200.00 and beyond. For those who are in around $1000.00, be careful not to allow the market to shake you out if it moves back to mid $600’s, this is normal behavior for a secular bull run in gold.

Bear Stearns came within an inch of its life this week as “Bear Stearns stock lost nearly half its market value, about $5.7 billion, in a matter of minutes”. A bailout by the Federal Reserve and JP Morgan are the only things that have kept it alive for now. This of course sent markets tumbling over 200 points, and could very well be just the beginning. We still have another $350 billion in write downs to see reported, and Jim Rogers feels the best equities to short right now are the big Financial Institutions.

On that note, I have to say I love Jim Rogers. The man has a backbone of steel. He recently did an interview with CNBC, and it cracks me up to watch him hold on to his patience while trying to educate an obviously ignorant news anchor about monetary policy fundamentals. You can view the video here: Jim Rogers on CNBC . My favorite quote of Jim Roger’s: Abolish the Federal Reserve. God knows I love this man.

On to our market snapshot:

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Mortgage lenders see more borrowers give up
By Noelle Knox, USA TODAY

On the front lines in the mortgage foreclosure crisis, lender and loan servicer Dennis Lauria says his deepest losses are from borrowers who owe more than their homes are worth and simply mail in the keys, rather than try to work out a new payment plan.

“I can’t get you to pay if you’ve got no skin in the game,” says Lauria, senior vice president of Popular Mortgage Servicing in Cherry Hill, N.J., who says 14% of his customers with subprime loans — high-interest loans given to people with poor credit ratings — are in default.

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Hedge Funds Reel From Margin Calls Even on Treasuries
By Tom Cahill and Katherine Burton

March 10 (Bloomberg) — The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.

Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders — staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market — raised borrowing rates by as much as 10-fold with new claims for extra collateral.

While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world’s safest securities, because of the price fluctuations in the bond market.

“If you have leverage, you’re stuffed,” said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won’t get their money back.

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Metals - Spot gold breaks and holds above 1,000 usd/oz as dollar slumps further

03.14.08, LONDON (Thomson Financial) - Spot gold broke and held above the key psychological 1,000 usd barrier and traded at a record 1,002.50 usd per ounce as the dollar tumbled to a new record low against the euro.

The dollar’s freefall, which continued today with the greenback hitting another record low against the euro, has made gold cheaper for those trading in stronger currencies. Bullion is often seen as hedge against inflation and has also moved up in line with rocketing oil prices, which yesterday touched a record 111 usd.

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Global subprime losses hit $215 billion: Japan’s FSA
© Reuters 2008
Mon Mar 10, 2008 7:49am EDT

TOKYO (Reuters) - Subprime-related losses at global financial institutions have so far totaled as much as $215 billion, with about 55 percent of that coming from the United States, the head of Japan’s financial regulator said on Monday.

The estimates from Japan’s Financial Services Agency (FSA) come after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) said in a report late on Friday Wall Street banks are facing a “systemic margin call” that could deplete them of up to $325 billion in capital.

European losses totaled about 8 trillion yen ($78.5 billion), while Asia and Canada together accounted for about 1.4 trillion, FSA Chairman Takafumi Sato told reporters at a regular briefing.

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Sorting Through the Rubble in Post-Bubble America
By MIKE WHITNEY
March 8-9, 2008

“Market conditions are the worst anyone in this industry can ever remember. I don’t think anyone has a recollection of a total disappearance in liquidity…There are billion of dollars worth of assets out there for which there is just no market.” Alain Grisay, chief executive officer of London-based F&C Asset Management Plc; Bloomberg News

The hurricane that began with subprime mortgages, has swept through the credit markets wreaking havoc on municipal bonds, hedge funds, complex structured investments, and agency debt (Fannie Mae). Now the first gusts from the Force-5 gale are touching down in the real economy where the damage is expected to be widespread. The Labor Department reported on Friday that US employers cut 63,000 jobs in February, the biggest monthly decline in five years. The cut in payrolls added to the 22,000 jobs that were lost in January. 52,000 jobs were cut in manufacturing, while 331,000 have been lost in construction since September 2006.

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Banks face “systemic margin call,” $325 billion hit: JPM
By Walden Siew
Sat Mar 8, 2008 9:23am EST

NEW YORK (Reuters) - Wall Street banks are facing a “systemic margin call” that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.

JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group’s mortgage fund also failed to meet $37 million in margin calls this week.

“A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages,” according to the report co-authored by analyst Christopher Flanagan. “We would characterize this situation as a systemic margin call.”

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China’s Inflation Surges to 8.7% as Food Prices Soar
(Update3)
By Kevin Hamlin and Li Yanping

March 11 (Bloomberg) — China’s inflation accelerated to the fastest pace in 11 years as the worst snowstorms in half a century disrupted food supplies, adding pressure on the central bank to raise interest rates.

Consumer prices climbed 8.7 percent in February from a year earlier after gaining 7.1 percent in January, the statistics bureau said today. That was faster than the 7.9 percent median forecast of 22 economists surveyed by Bloomberg News.

Food costs soared 23 percent after blizzards destroyed crops and snarled transport links, causing shortages. China, the biggest contributor to global growth, raised rates six times last year in a failed attempt to curb prices and more increases risk triggering an economic slump as export demand weakens.

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FDIC reports second bank failure of 2008
By Robert Schroeder, MarketWatch
Last update: 5:35 p.m. EST March 7, 2008

U.S., Missouri close Hume Bank

WASHINGTON (MarketWatch) — A second bank has failed this year, the Federal Deposit Insurance Corp. said Friday. The FDIC and the Commissioner of Missouri’s Division of Finance closed Hume Bank in Hume, Mo., on Friday, the federal banking regulator announced.

It was the second bank to fail this year, the FDIC said. The first was Douglass National Bank in Kansas City, Mo., on Jan. 25.

The FDIC didn’t give a reason for the failure.

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Iraq war cost estimates run into the trillions
By David R. Francis | columnist
from the March 10, 2008 edition

New book says war will cost at least $3 trillion before it’s over.

Next week, the Iraq war enters its sixth year. As casualties mount (about 4,000 American soldiers killed since the start of the war in March 2003), so do the bills.

“The cost is going up every month,” says Linda Bilmes, an expert at Harvard University’s Kennedy School of Government. She estimates the short-term, “running cost” has reached $12.5 billion a month. That’s up from $4.4 billion a month in 2003. Add in long-term factors, such as the care of veterans and interest on federal debt incurred as a result of the war, and the cost piles up to $25 billion a month nowadays.

Last September in a phone interview, Ms. Bilmes estimated the war’s total price tag as easily exceeding $2 trillion. In a book published last month, she and Joseph Stiglitz, a Nobel Prize-winning economist from Columbia University, New York, estimated the total long-run cost at $3 trillion in 2007 valued dollars. If you add in Afghanistan and various costs to the economy, the sum reaches $4.95 trillion.

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Fed turns on the spigot of money again
By Rex Nutting & Ruth Mantell, MarketWatch
Last Update: 1:03 PM ET Mar 11, 2008

Mortgage-backed securities will be swapped for safer Treasurys

WASHINGTON (MarketWatch) — The Federal Reserve and other leading central banks doubled to more than $400 billion the amount of money they’re willing to lend to banks and bond dealers, hoping to flood dysfunctional credit markets with enough money to get them working again.

The Fed announced a new temporary lending program on Tuesday that will allow participants in the bond markets to swap the mortgage-backed securities that they can’t currently sell for highly liquid Treasurys that they can. The hope is that the extra money in the financial system will restore trust and keep prices of illiquid securities from plunging.

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Dollar’s Clout Sinks Worldwide
Thursday March 13, 3:04 pm ET
By Alan Clendenning, AP Business Writer

From the Bowery to the Taj Mahal, Falling Greenback Loses Clout As King of Currencies

SAO PAULO, Brazil (AP) — Antique store owners in lower Manhattan, ticket vendors at India’s Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don’t want U.S. dollars.

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.

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US Foreclosure Activity Rose in February
Thursday March 13, 7:41 am ET
By Alex Veiga, AP Business Writer

Number of US Homes Facing Foreclosure Jumps Nearly 60 Percent in February

LOS ANGELES (AP) — Nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year, with Nevada, California and Florida showing the highest foreclosure rates, a research firm said.

A total of 223,651 homes across the nation received at least one notice from lenders last month related to overdue payments, up 59.8 percent from 139,922 a year earlier, according to Irvine, Calif.-based RealtyTrac Inc.

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Goldman Sees `Explosive’ Commodity Rallies, $175 Oil (Update1)

By Claudia Carpenter and Alexander Kwiatkowski

March 14 (Bloomberg) — Commodities may have “explosive rallies” in the next couple of years, with crude oil rising to $175 a barrel, according to Goldman Sachs Group Inc.

Political decisions on money flows, labor and technology are “substantially constraining supply growth” of commodities, Goldman analysts including Jeffrey Currie in London wrote in a report today. “This will likely support the ongoing structural bull market in commodities until these policy-driven investment constraints are removed and/or demand is adjusted.”

Commodities are in their seventh year of gains as underinvestment in refineries, mines and land sent prices for oil, gold, platinum and wheat to records. More natural resources are controlled by political entities than at any time since the 17th century, according to the Goldman report.

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Run On The Bear?
Liz Moyer, 03.14.08, 11:17 AM ET

After spending the last week trying to quash rumors that it was in a crisis, Bear Stearns said Friday that its liquidity position had deteriorated significantly and that it had turned to JPMorgan Chase and The Federal Reserve Bank of New York for help staying afloat.

Chief executive Alan Schwartz, who had appeared on CNBC Wednedsay saying the bank’s balance sheet and liquidity levels were fine (They should swear these CEO’s in before questioning, please raise your right hand, do you…) , blamed problems on persistent rumors of imminent collapse that the company couldn’t suppress.

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Dollar Falls to Record Low Against Euro, 12-Year Low Versus Yen

By Ye Xie and Bo Nielsen

March 14 (Bloomberg) — The dollar sank to the weakest ever against the euro and to a 12-year low versus the yen after JPMorgan Chase & Co. and the New York Federal Reserve bailed out Bear Stearns Cos., signaling credit market losses may widen.

The U.S. currency also plunged to below one Swiss franc for the first time as traders speculated the Fed will slash interest rates a full percentage point next week to keep a credit-market crisis from triggering a recession. As the dollar slumped, gold reached a record above $1,000 an ounce.

“The initial reaction is to sell the U.S.: sell the dollar, sell the equities,” said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. “This is bad news; it’s definitely a confirmation of the reality that U.S. financial institutions are having a hard time.”

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Fuel Facts
American Trucking Associations
Updated: Mar.12, 2008

• For a number of motor carriers, fuel has now surpassed labor as their largest expense.

• The rising cost of fuel has the potential to create a ripple effect through the economy because, if prices continue to rise, eventually consumers will likely see higher costs for whatever they are purchasing that is being delivered by truck. This is significant because more than 80 percent of communities in the U.S. get their goods solely by truck.

• Commercial trucks consume 53.9 billion gallons of fuel each year. About 39 billion gallons, or 73 percent, is diesel. The remaining 27 percent is gasoline.

• A one-penny increase in the price of diesel annualized over an entire year costs our industry an additional $391 million a year.

• The Energy Information Administration reported Monday that the national average price of retail on-highway diesel skyrocketed 16.1 cents to $3.819 per gallon, setting a new record high for the third consecutive week. Diesel prices are $1.13 higher than during the corresponding week in 2007. Nationwide the average price across the country for a gallon of Ultra-Low Sulfur Diesel jumped to $3.825. Diesel prices are most expensive on the West coast, averaging $3.89 per gallon, and lowest in the Rocky Mountain region, averaging $3.73 per gallon.

• The U.S. Energy Information Administration recently predicted that the average price will rise to $3.45 per gallon this year, 20% higher than the 2007 average. In 2007, we spent $112.6 billion on fuel, or $6.6 billion more than we spent on fuel in 2006.

• There is strong correlation between crude oil prices and diesel prices. The cost of crude accounts for more than 60% of diesel’s pump price. The same is true for gasoline.

• There are 42 gallons of oil in a barrel of crude oil. A barrel of crude oil, when refined, yields about 20 gallons of gasoline and seven gallons of diesel, as well as other petroleum products (heating oil, jet fuel, etc.).

• In 2006, Canada was the top oil supplier to the U.S., accounting for 18 percent of U.S. crude oil imports.

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High Wheat Prices Raise Grocery Costs
Saturday March 15, 4:46 am ET
By Betsy Blaney, Associated Press Writer

Sticker Shock at the Grocery: Soaring Wheat Prices Mean More Expensive Food in Every Aisle

LUBBOCK, Texas (AP) — If you think the cost of gassing up your car is outrageous, wait until you need to restock your pantry.

The price of wheat has more than tripled during the past 10 months, making Americans’ daily bread — and bagels and pizza and pasta — feel a little like luxury items. And baked goods aren’t the only ones getting more expensive: Experts expect some 80 percent of grocery prices will spike, too, and could remain steep for years because wheat and other grains are used to feed cattle, poultry and dairy cows.

“It’s going to affect everything … impact on every section of the grocery store,” said Michael Bittel, senior vice president of King Arthur Flour Co. in Norwich, Vt.

Consumers such as Maria Cardena feel trapped by the prices. She said the bread she buys has jumped from 69 cents a loaf to $1.09 in recent weeks.

“You have to buy it,” said the 29-year-old mother from Lubbock, Texas. “You can’t go without it. Everything has gone up.”

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Fed and Rival Bail Out Bear Stearns
Saturday March 15, 4:48 am ET
By Stephen Bernard and Joe Bel Bruno, AP Business Writers

On the Brink of Collapse, Investment Bank Bear Stearns Gets Lifeline From a Rival and the Feds

NEW YORK (AP) — On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government. The near-miss raised new alarm about the credit crisis — and whether other big firms might be in jeopardy.

The rescue came from JPMorgan Chase & Co. and, in an extraordinary step, the Federal Reserve, both rushing to pump new money into the venerable Wall Street firm after its financial state deteriorated so much in a 24-hour period that it threatened to fail.

Bear Stearns stock lost nearly half its market value, about $5.7 billion, in a matter of minutes, and pulled the broader market down with it. The Dow Jones industrial average fell nearly 200 points.

If Bear Stearns were to go under, “it has the potential of bringing down the whole market,” said Richard Bove, an analyst at Punk, Ziegel & Co. “This is the crescendo of the crisis.”

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Chart of the Day - GOLD

Gold has been in a strong bull market since 2001 and picked up the pace in mid-2005 and then again in mid-2007. In fact, gold has gone parabolic and today briefly crossed the $1000 per ounce level for the first time. Today’s chart illustrates how the price of gold has nearly quadrupled during its seven year bull market.

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