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“Marks & Spencer Group PLC is facing the specter of rising inflation as it fights for market share in the fiercely competitive U.K. grocery and clothing market, just as the government’s austerity cuts start to bite. The U.K. high street bellwether has enjoyed a strong third quarter, including the key Christmas period, when same-store sales…
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“The European Central Bank intervened to prop up the eurozone bond markets on Monday as political leaders and bankers warned the debt crisis was deepening amid fears Portugal was edging closer to an international bail-out. Although European Union officials denied they were talking about a bail-out for Portugal, the ECB had to buy the country’s…
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“David Cameron has warned that rising inflation poses a threat to Britain amid warnings from economists that the Bank of England has failed to tackle the worrying trend. The prime minister insisted he did not want the country to go back to the days when inflation was a persistent problem. The recent figures – caused…
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“In spite of their security purchase plans, the Fed has not been successful in keeping long-term Treasury yields low. As the yield chart above indicates, 10-year prices have been falling in spite of the Fed’s buying spree (remember, yields go up when prices are falling). The Fed’s argument is that the recent stimulus packages approved…
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“The Fed’s lucky streak of luring bond investors with low interest rates may be drawing to a close. Nevertheless, the extended period of low borrowing costs has bred a new breed of investor. To the bulls and bears, we can now add the ostriches – those who bury their heads in the sand of declining…
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“Gold prices generally rise during times of actual or projected inflation because of gold’s traditional status as a “safe haven” asset. Gold buyers seeking an asset which reacts favorable to inflation or currency devaluation often move from the falling currency into gold. Currently, the Federal Reserve is more concerned with deflation than inflation and, as…
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“It is our suspicion that China likes declining commodities. Soaring prices over the past several months have made it much more expensive for China to squelch its never-ending thirst for raw materials. What better way to get lower prices and fighting inflation pressures at home, than to promote the idea that interest rates will rise,…
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“The sting of inflation is showing up in the emerging market economies, where rising food prices are stinging the consumer. (Oh sorry I forgot, food inflation isn’t inflation!) China has a de facto USD peg and that policy means that, in the absence of other action, US monetary policy is Chinese monetary policy. The tsunami…
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“Here’s the problem in the main: Bernanke’s only tool to “tighten” monetary policy means selling bonds into the market and taking in cash from the system. But what happens if he holds bonds that have all gone down in value? He gets screwed, that’s what. In an extreme case, the Fed could go “bankrupt.” Bernanke…
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“One of China’s leading credit rating agencies has downgraded United States of America government debt in response to what it sees as deliberate devaluation of the dollar by quantitative easing and other means. If China, now the second biggest economy in the world, stops buying US government bonds this could have a very negative effect…
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“Monetary central planning has worked no better than any other form of central planning over the last one hundred years. The world’s central bankers – just like the central planners in the old Soviet Union – just do not have the knowledge, wisdom and ability to successful manage the monetary system of a market economy.…
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Economic Bulletin Vol. L, no. 11 | November, 2010 The Fed’s profits from interest on its holdings soared after 2007. But so did the risks from its purchases of toxic assets. Its accounting methods understate these risks.