Watch the Road!

When driving, it is very important that you stay alert and pay attention to the road. The consequences are literally grave if you don't. In life, there is little difference. Last week, I pointed out that we are in some bumpy economic times to say the least. One week ago, the spot prices of gold and silver were $806.40 and $14.55 per ounce respectively. This week gold is $832.15 and silver is $15.47 per ounce. Gold increased 3.2% and silver increased 6.3%, in one week! The US dollar continued its slide against the major world currencies and fell to an historic low of 75.39, including a minor rebound on Friday. The price of oil rose again slightly at $95.98 per barrel. The effect at the gas pump has been a bump of about $0.25 per gallon in the last couple weeks.

Despite moves by the Federal Reserve to lower interest rates and increase the money supply, the value of the dollar continued its descent. Inflation will be the result. The Fed will likely lower rates again in their December meeting. Fed chairman, Ben Bernanke, said that the dollar's strength in the medium term would ultimately depend on the state of the U.S. economy, global trade, and ensuring that U.S. financial markets are open to foreign investment. My question is, who wants to invest in a commodity (the US dollar) that is nosediving? China renewed its economic warning to "take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies". China has 1.3 trillion US dollars in its treasuries and doesn't like the decline of its assets. This will likely continue the dollar's slide as China and other countries exchange their US securities for other, more stable investments.

As pointed out last week, the net affect of all of this could be a period of hyper-inflation. If there are other factors added to this such as a steep sell off on Wall Street, or another decline in real estate or the mortgage industry, we could begin a steep decline in our economy. The telling indicator will likely be this holiday season's sales reports. If US consumers don't spend at the stores, we will be looking at a spiraling recession in the coming months.

We must pay more careful attention, therefore, to what we have heard, so that we do not drift away. Hebrews 2:1

Sharp curve ahead, watch the road! Stay tuned ...