US: Inflation heats up as home building slows

WASHINGTON - Wholesale prices shot up in July at the fastest year-on-year rate since 1981, while home builders cut back on construction as they worked through a glut of unsold homes, government data showed on Tuesday.

The reports offered little solace to the Federal Reserve, which is hoping a slowing economy will cool inflation so the central bank can hold off raising interest rates.

"Two consecutive elevated readings on core consumer prices, combined with today's worrisome report on producer prices, will be hard for the Fed to overlook at its next meeting" (on September 16), said Kenneth Beauchemin, U.S. economist with Global Insight in Lexington, Massachusetts.

"That said, recent and further evidence of significant economic weakness makes it unlikely for the Fed to push up interest rates this year," he added.

The Labor Department's Producer Price Index, which measures prices at the factory door, climbed 1.2 percent after a 1.8 percent gain in June. So-called core producer prices, which exclude food and energy, jumped 0.7 percent in July after a 0.2 percent June increase.

US: Wholesale prices rising at fastest pace since 1981

Wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday.

The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected.

Core prices, which exclude food and energy, rose 0.7 percent. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.

Credit crunch may take out large US bank warns former IMF chief

The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

The Goldsmiths--Part I

In March 2008, gold hit a high of around $1030 per ounce. By mid-August, it had collapsed to $772. Similar falls happened to most of the commodities and foreign currencies. Wheat went from a high of $13-15 to $7-8 per bushel; Silver, soybeans and corn all crashed as well. Even the EURO currency went from almost $1.60 to $1.46 and oil fell from $149 to $111.

Here, the question must be asked--how is it possible that these prices can collapse in just a matter of days? For the answer, one must address the subject of the historic goldsmiths and how they are still around today and still making money--like never before. This article and two succeeding ones will broach this theme.

Signs Economic Commentary for 18 August 2008

Summary: The fall of gold accelerated last week with gold falling 9% against the dollar last week and 16% over the past two week. Commodities in general have been falling. We seem to be seeing the bursting of the commodities bubble due to the view that the world economy has not yet "decoupled" from the United States.

No doubt the easing of commodity inflation and the increase in industrial production in the U.S. is good news. The problem is that the root cause of the recent distress, the collapse of the housing market, shows no sign of letting up.