I can not say this enough times, nor emphasize enough, that the Obama regime is Jimmy Carter in spades. This is not a reference to Obama's ethnicity, but a reference to the fact that the Obama regime is committing all the economic sins of Jimmy Carter, but in larger proportions - in spades.
The economic changes we see are part of what bedeviled Jimmy Carter: STAGFLATION. This has several elements: 1. an economic stagnation, 2. currency inflation, to be followed by price inflation and 3. a sharp rise is commodity prices, especially gold. High interest rates come later.
The first two graphs show the Baltic Dry Index on two different scales. The Baltic Dry Index reflects shipping prices, which in turn is a measure of international shipping, i.e. the international economy. The three large peaks in 2009 and 2010 reflect fluctuations, but in 2010, the BDI dropped reflecting the current slowdown. Oil prices moved to the 72-84 range, while commodities have increased.
2010 saw a huge deterioration in the US economy. Housing sales have dropped to the lowest level of score keeping, along with housing starts. Unemployment is still hovering near 10% and the breathless shilling of the networks about the "summer of recovery" and the "good news" in initial unemployment (4000 less than expected but still near 500,000 per month) should result in the revoking of broadcast licenses of the alphabet networks.
So much for the stagnation part.
Monetary inflation meanwhile is picking up steam. The dollar has been steadily falling in value and currently stands at 80.44, with its 50 DMA is about to break below its 200 DMA - signifying and end to a recent rally. Gold has been moving up and is currently trading at 1,291$/oz, heading to the forecast of $1,300/oz.
Price inflation is just beginning to pick up speed. Insurance costs are skyrocketing, reflecting the changes mandated by ObamaCare. There are two things holding back price inflation: oil prices have been lagging and deflation continues to force companies to keep price increases to a minimum. This is about to change.
The Stock Market rally is coming to an end. The bearish sentiment (very low now, but the graph uses the bearish sentiment inverted) is hitting record lows now, which reflects a coming drop. The low bearish sentiment reflects the recent advances in stock prices. THIS IS DECEPTIVE. Recent increases in the DOW reflect the rise in APPLE nation, but generally, the number of stocks rising continues to shrink, as investors concentrate on the fewer and fewer companies that are still doing well.
A drop in stock prices is coming. How big a drop? Folks using the Elliot Wave Theory forecast the DOW to drop to 4,000, while Uncommon Wisdom (using the cycle theory) forecasts a low of 9,000, maybe 8,700 in the DOW. Much of the driving force for the Stock Market as well as the Gold Market will come from the size of the FED's quantitative easing. Bernanke is worried that the various stimuli have not stimulated the economy, while the continuing deflation keeps inflation too low. It is precisely these sentiments that will cause inflation to become higher than desired by the FED. And with that will come higher interest rates and a demise of the dollar.
The last graphic shows the expected prices for commodities and the dollar. I think the effects will be more severe. During Jimmy Carter's watch the inflationary impulse was tame compared to what's coming. There was no threat of European currency failure and bond defaults. In today's dollars, gold should reach $2,400/oz, but the financial panic may drive it twice as high. We shall see.
