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Warning Signs From China

Wednesday, March 9, 2011, 9:36 AM

The economic miracle of China may be about to undergo a crash landing. The potential for social unrest to spread within and across China notwithstanding, China is trying to delicately nip an inflationary surge in the bud, but risks crashing its housing market in the process.

There are signs that it may have already done so.

High inflation is a sure-fire way to ignite the poorer classes of people, with which China remains generously endowed. So China is actively talking about and targeting inflation via its monetary policies:

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The Coming Rout

Tuesday, March 8, 2011, 9:40 AM

The Coming Rout

Tuesday, March 8, 2011

Executive Summary

  • Further evidence that a Fed quantitative easing stoppage in June is likely
  • Implications such a stoppage will have on stocks, commodities, bonds, and precious metals
  • Why this will be more damaging to the economy than the 2008 correction
  • Will the Fed eventually resume quantitative easing?
  • Three alternatives to watch for that could prevent the coming rout
  • How to hedge against the predicted rout

Part I:  Why Things Are About To Get Turned Upside Down

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II:  The Coming Rout

There are a few things that make the prospect of a Fed quantitative easing (QE) stoppage more likely.

The Fed Notices Inflation

Using a flashlight, a map, and both hands, the Fed managed to find something:

Fed Finds Climbing Costs Hit Shoppers 

March 3, 2011

Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for wheat, cotton, iron, and other commodities could increasingly reach consumers in coming months, according to the Federal Reserve's beige book survey.

The report, a summary of economic conditions across the central bank's 12 regional districts, said manufacturers "in a number of districts reported having greater ability" to pass through higher costs. "Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months," the Fed said.

It's good to see that the Fed is at least dimly aware that price inflation is in the pipe and coming soon to a market near you.  The rest of the world has had no such difficulties in detecting inflation, especially on news like this:


Information Scouting Report: Vol 2 (3-5-11)

Saturday, March 5, 2011, 7:02 PM

Here's another scouting report as I clear off my desk for the first week of March, 2011.  There's so much going on right now that it's quite difficult to keep it all arranged.  

We begin with a rather odd admission by the Governor of the Bank of England that he's puzzled by a lack of citizen outrage, look at Norway's drilling dry spell, and end with the Fuzzy Number known as the unemployment rate.

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The Hyperinflation Risk

Friday, March 4, 2011, 1:04 PM

Despite the weak and increasingly ignored protestations of the Fed to the contrary, the world is in the grips of a pretty significant inflationary event. A little bit of inflation is a containable event. A hyperinflationary event is not.

In our most recent podcast, John Williams told us that he considers hyperinflation to be a serious risk for the US by the end of 2011. In order to understand this risk, we need to understand just a few terms and then link them to a couple of ideas.

The first set of terms was brought up in a recent question by a member:

I'm having trouble connecting the dots regarding the US dollars as reserve currency and related issues. The part that I'm having trouble understanding is around repatriation of the dollar by foreign countries. How does this actually happen?

~ jnlyons55

Good question. There are many ways, but the mechanisms are roughly the same, so here's one.

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Part 2 of the John Williams Interview: Hyperinflation Ahead

Wednesday, March 2, 2011, 10:57 PM

The second part of Chris' interview with John Williams, noted guru on government statics, is reserved below for you, our enrolled members.

If you've not yet listened to Part 1, click here to do so.

Part 2 of the interview delves deeply into the specific risks our economy faces and why John concludes high inflation is the sad but certain outcome. And why he has substantially moved up his date for the onset of hyperinflation given the Fed's recent actions.

Among other details, John provides his outlook on the expected signs hyperinflation is manifesting itself and what individuals can do to protect themselves against it.
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Blame the Victim

Monday, February 28, 2011, 6:29 PM

If we were to view Bernanke and the Fed Governors through a psycho-criminologist lens, they might best be described as an abuser that blames the victim.

How else to explain their recent proclamations that if any inflation is to be found in the world, the fault largely rests with the emerging markets' failure to control demand?

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Going, going, gone.

Tuesday, February 22, 2011, 10:21 PM

Well, that was quick. As you may have noticed, things are rapidly progressing from the outside in as the turmoil in the Middle East has now taken down two oil rich countries.

Dictator Loses Grip in Desert

On the ground in the eastern chunk of this oil-rich desert nation, the signs of rebellion are plain to see in the armories of a military base near Baida: Weapons crates lay busted open and empty. Rifles are missing from their racks. Left behind are helmets and gas masks and cleaning kits—things that can't shoot.

For four days, rebels newly armed with anti-aircraft guns and Kalashnikovs battled forces loyal to Libyan strongman Col. Moammar Gadhafi and commanded by one of his sons. After days of firefights, feints and an ambush on unarmed local sheiks, the regime forces surrendered their hold on the vital local airport Tuesday morning—placing nearly all of eastern Libya outside Col. Gadhafi's control.

The battle for Baida airport is one example of how quickly the tide across Libya has turned against Col. Gadhafi. A brutal crackdown by pro-Gadhafi forces across the country has left at least 300 dead over six days, civil-rights groups say.

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Silver Shortage Looming?

Tuesday, February 15, 2011, 12:22 PM

The silver market continues to send urgent signals that supplies are very tight, an often bullish condition sometimes associated with rapid price rises.

For those not up on the lingo of the futures market, there are two ways to describe the prices of commodities in the future as compared to today. One describes a condition where commodities cost more in the future than they do today, and it is rather non-intuitively termed contango. If a commodity is "in contango," it is priced higher for delivery in future months than it is for delivery today. Oil is an easy example, as it is nearly always in contango, and for perfectly intuitive reasons: There are carrying costs associated with storing oil (such as interest, storage fees and insurance) and those costs assure that future oil is almost always more expensive than present oil.

The other term describes the situation where the future price is less than today's price, a rare condition for practically every commodity, and it is called backwardation. A commodity that is "in backwardation" is priced lower for delivery in future months than it is for delivery today.

Silver is in backwardation and has been for a while now.

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Guide to Navigating the Coming Crisis

Wednesday, February 9, 2011, 2:50 PM

Guide to Navigating the Coming Crisis

Wednesday, February 9, 2011

Executive Summary

  • Here we provide a detailed summary of the complete analytical framework that has delivered double digit investment gains (2004-2010)
  • Why this 'recovery' is false
  • Why the Fed is stuck between a rock and hard place
  • Why the US Treasury market is vulnerable
  • Asia is the most likely trigger

Part I

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Guide to Navigating the Coming Crisis

Illuminating the future is our job, and we take it seriously.

The unfolding Egyptian situation provides a perfect analogy for what I see coming to the developed world. During times of massive change, it is most important to have a clear-eyed view, few limiting beliefs, and a reliable framework to help you decode rapidly emerging events.

What we do here at Martenson Central is deliver both up-to-the-minute information-scouting services and a framework through which those events and information can be interpreted. 

Knowing what is likely to happen and having a solid framework for understanding those events provides emotional relief, removes uncertainty, and allows for crisper and more effective decisionmaking that can make you safer and even wealthier. These benefits are not speculation on our part; they are directly drawn from comments and feedback we've received from our members over the past several years.

The Crash Course is the foundation of that framework, which illuminates the main predicament as an inherent conflict between the currently evolved types of economic and monetary systems and looming resource scarcity, especially of oil.


Wikileaks: US Officials Concerned Saudi Arabia Has Less Oil Than Claimed

Wednesday, February 9, 2011, 8:06 AM

There has been another Wikileaks release, exposing the US diplomatic channels as being aware of the possibility of Saudi overstatement of reserves and the possibility that future Saudi 'swing production' may be far more limited than believed.

Here's how the Guardian UK put it:

The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.


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