Watch the bond spread.

If the FED is ending its buying of long term debt and only buying short term through the various scams they have with primary dealers and other central banks, we could see the carry trade continue using the low or almost zero short term money. Where do they borrow this money from, AP, that they use for the carry trade? Who borrows it?

The financial system is in deep trouble here too and we are not seeing a recovery that would help the bank balance sheets without FED intervention. If the European financial system falls, it will likely drag us down too and the dollar in value, even if not in price.

The economic power isn’t just shifting from the U.S. but from almost all developed nations.

Commodities are a mixed bag. Food commodities are a demand issue due to the growing global population and declining global food stockpiles.

The recent import/export report tells us more than the CPI report does because it reflects global pricing better.

quote
Fuel: Nonfuel import prices rose 0.4 percent in November as higher prices for nonfuel industrial supplies and materials, capital goods, and foods, feeds, and beverages contributed to the advance. Prices for nonfuel imports rose between 0.4 percent and 0.5 percent in each of the past four months.

……Higher prices for soybeans, corn, and wheat led the upturn in agricultural prices. The November increase led the price index for overall agricultural prices up 0.6 percent over the past 12 months, the first year-over-year increase since a 6.0 percent advance for the year ended in October 2008.

All Exports Excluding Agriculture: Prices for nonagricultural exports increased for the eighth consecutive month, rising 0.7 percent in November. Higher prices for nonagricultural industrial supplies and materials and finished goods contributed to the advance.

http://www.bls.gov/news.release/pdf/ximpim.pdf
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The velocity of money here will remain low but, the international velocity of dollars may pick up in some commodities as most developed nations currencies, including the U.S. see declining value. I think that right now, the volatility will be so high for a while that no clear trend will be seen until next year short of some really major news event here or out of Europe or concerning the global economic recovery which I still have doubts about.

- JanPaul

Related Posts:

• With inflation rising, the monetizing of debt (quantitative easing) appears to be working as the FED hoped, but, probably not the way they hoped.
• The import/export report today, may shed some light on sales.
• I think that we are going to see another very serious liquidity crisis.
• Physical gold and silver, for short term expenses should the dollar collapse (months to a couple years) food that is easily stored.
• Unemployment drops to 9.7%. OK, so here’s the conflicting part of their report:

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