Crude Awakening for Economies as Oil Surges

Another day, and another surge in precious metal and crude oil prices. Yesterday Brent crude priced in sterling and euros hit new record highs, and moved above $124 a barrel in trading for a short time this morning. West Texas Intermediate (WTI) – the North American benchmark – has been an even stronger performer, gaining over 2% in trading at the New York Mercantile Exchange yesterday to over $108 a barrel.

Though the mainstream media correctly fingers the embargo on Iranian oil as a significant contributor to this current price spike, none are commenting on central bank money printing as a contributing factor. Yet currency-induced cost-push inflation is an inevitable result of central banks’ attempts to devalue the currencies they issue. Is it any wonder – given the story told by the chart below – that all manner of commodities, as well as stock markets all over the world, are powering higher?



A symptom of US Federal Reserve stimulus efforts is continuing improvements in US economic data. The data may in some cases give a misleadingly rosy picture of the state of the US economy, but that doesn’t mean that it cannot be used to spot a trend – and in recent months the up-trend has been undeniable to anyone with eyes and ears. As reported at EconomicPolicyJournal, yesterday brought news of better than expected rises in the Kansas City Manufacturing Index, which is a monthly measure of manufacturing activity in Kansas, Colorado, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico, and the western third of Missouri. This is coinciding with the fastest gains in farmland prices in the Midwest for 35 years.
These are of course the positive effects of money printing. But alas, it’s impossible to separate the good from the bad as far as quantitative easing is concerned. Central banks may get the good effects if they pump enough new base money into the system – currency devaluation that spurs rising asset prices and (temporarily at least) falling unemployment, etc; but they will also get the bad effects – rising commodity prices. They can’t have their cake and eat it too.

As far as the gold and silver price charts are concerned, it’s good news for the bulls with both metals accelerating above important resistance levels on rising volume at the Comex. $1,800 is the next target for gold, while technical analyst Eric De Groot has highlighted the importance of $37.50 for silver. As Eric writes, it looks like the gloves are about to come off in silver.