More stagflation news on $1,000 gold and weak spending

More signs the recession is here

consumer retail spending contracted, by six-tenths of a percent, in February. Economists (the dismal pseudo-science?) had been reportedly expecting a 0.2 percent increase:

“This is a downward spiral consistent with a recession,” said Kurt Karl, chief economist at Swiss RE in New York.

Gold – more signs we have real inflation problems

Gold has punctured the psychological $1,000/ounce barrier. And we know what happened when oil busted $100/bbl. It collected its breath, then speculators started bidding it up even higher.

If Big Ben Bernanke (The Worst Fed Head Since Greenspan™) is serious about a 3/4 point Fed rate cut next week, I certainly wouldn’t be surprised to see oil at $120 if not $125. Ditto for $1,100 gold, maybe even $1,200.

Result? The Dow was cratering in early trading.

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Another day and Ben Bernanke smokes more crack

Federal Reserve chair Ben Bernanke today told Congress the nation isn’t “anywhere near” the dangerous stagflation situation of the 1970s.:

“I don’t anticipate stagflation,” Bernanke told the Senate Banking Committee. “I don’t think we're anywhere near the situation that prevailed in the 1970s.”

Oh, really? Well, Big Ben, let me help you read the tea leaves.

Some people are worried the credit crunch that has followed upon the collapse of the housing bubble, and related credit alphabet soup “instruments,” could also affect commercial real estate.

Oil futures closed today at $102/bbl.

The dollar hit another new low against the euro, which broke the $1.53 mark.

So, credit is continuing to tighten up while inflation is continuing to loosen up. And, you’re not worried about stagflation.

Time to trademark your nickname: Worst Fed Head Since Greenspan™, because you’ll keep it after somebody else replaces you, unless that person is really clueless.

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Yet more economic woes; $1,000 an ounce gold next?

Gold hits $900 an ounce; after oil broke the psychological barrier of $100/bbl, is $1,000 an ounce gold next?

Quite possibly:

“Concerns of a recession will keep pushing up gold prices,” Carlos Sanchez, a precious metals analyst at CPM Group in New York, said. “Depending upon what happens in the economy and in the Middle East, we could see gold testing $1,000 an ounce, maybe even this quarter.”

Consumer confidence, meanwhile, plunges again, to an all-time low:

According to the RBC Cash Index, confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December — and a benchmark of 100 — and was the worst since the index began in 2002.

So, if Bernanke tries much more rate-cutting, gold WILL pop $1,000, and oil WILL threaten $110, even with a struggling economy.

As I have said recently, welcome to the world of stagflation.

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Can you say “stagflation”?

People my age and older remember this word from the Ford Administration. Now, with oil prices flirting with $95/bbl and likely ending further Federal Reserve interest rate cuts, and consumer confidence falling along with spending, while the housing-related credit crunch takes its toll, it may be time to break this word back out of cobwebs and bring it back into the lexicon.

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