The Electric Light Orchestra lyrics “… you took me ohh, higher and higher baby, it’s a living thing, it’s a terrible thing …” have been mulling through my head over the past week as central bankers’ inflation-fighting rhetoric moved to centre stage.

A succession of hawkish comments from US policymakers persuaded pundits that the US rate-cutting cycle was over, resulting in a stronger US dollar, plummeting government bonds, predominantly lower global stock markets (with Asia seeing the most red), and non-agricultural commodities coming off the boil.

Ben Bernanke, Chairman of the Federal Reserve, said on Monday that the danger of a “substantial downturn” in the US economy had abated during the past month but that inflation risks were growing.

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Speaking of higher inflation (see previous post) ... there are so many bad outcomes that could come from this especially in an economy which needs its life blood of "cheap money" to exist (solve problems).... I cannot even begin addressing all the myriad issues but let me throw one out - long term rates will be going up as inflation expectations pick up; and you know what is tied to long term rates - mortgages. So what happens to home prices when mortgage rates go up? They must go down - because higher rates means it costs more to own a home. Oh dear. Housing recovery of spring 2008, err summer 2008, err fall 2008, err spring 2009, here we come. But never fear the statistics show a "surprising increase in home sales" in certain areas - they forget to look behind the curtain and mention that these are

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Chart of the freakin' day ...You can see the original HERE.Gazprom expects oil to hit $250 a Barrel "in the foreseeable future". And at the same time, Citigroup boosted its 2008 Brent outlook 22 percent to $116.60 a barrel, while Merrill Lynch raised its forecast by 14 percent to $114. The International Energy Agency lowered its estimate for non-OPEC output this year by 300,000 barrels a day to 50.04 million, in its monthly report today. Saudi Arabia Calls for Summit on Energy Costs After a cabinet meeting led by King Abdullah, the Saudi government said, “the increase in prices isn’t justified in terms of market fundamentals,” according to a statement from the official Saudi Press Agency. No date was given for the energy summit. XX Sean's note -- talk is cheap.Bernanke Tries to Talk Up the Dollar, Vows Pigs Will Fly XX ...

After stock markets have held up bravely in the face of the credit crises and mounting economic woes, a combination of renewed concerns about the financial sector, a record-breaking spurt in the oil price, and a rotten unemployment number claimed their toll on Friday, triggering a sharp sell-off in most parts of the world.

“Today was a bona fide panic day. They threw ‘em in,” said Richard Russell, author of the Dow Theory Letters for the past 50 years. The bears were out in force, as personified by Bill King (The King Report): “The technicals, seasonals, fundamentals and financial system conditions are negative. And now the Fed

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Fed Chairman Ben Bernanke is trying to support the dollar, making rare statements on Tuesday about how the weak dollar has contributed to inflation, and that the Fed is closely monitoring the dollar. Bernanke went on to repeat his inflation concerns while speaking at Harvard University yesterday, saying that “some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve. We will need to monitor that situation closely." Interestingly enough, his comments come at a time when my models have been forecasting a bounce in the buck, and a short-term correction in gold, oil and other natural resources. So Bernanke’s unconvincing attempt to support the dollar comes as no surprise to me. These moves tend to happen at normal turning points in the market, which proves once again that it’s not the news that drives the markets necessarily, but it’s the ...

Scorching Hot Food Inflation Today, we are seeing the US dollar go up and gold go down. That's interesting, considering that inflation is nowhere near tamed.U.S. Agriculture Secretary Ed Schafer: " We are anticipating this year an over 40 percent increase in food price inflation globally, 43 percent approximately." Schafer added: "Of that we can identify two to three percent of that price increase that is driven by biofuels."So Mr. Schafer says something to scare the pants off us -- 43% food inflation. The same number was cited by Edward Lazar, chairman of the Council of Economic Advisors, in his testimony to the Senate last month. Most people seem to have missed that.At the same time, Schaefer's 2% to 3% figure for biofuel-caused inflation sounds bogus. So what can we believe?If you believe the IMF, the ...

Dear Subscriber,

When Martin called me for a chat the other day, I had no idea he was going to record it, put it up on the Web, and give all of our readers a chance to hear it.

But I’m glad he did — for two reasons: First, because I’m headed for Shenzhen next week on a special new mission — to visit the company that I think will benefit more from the energy crisis than any company in Asia, and perhaps in the world. And second, because, with the latest correction, these stocks are now dirt cheap.

So in case you missed the …

Soaring oil prices were mostly to blame for the past week’s stock market sell-off, but renewed concerns about US economic growth, corporate earnings and mounting angst about inflation pressures also featured prominently in determining the market’s fate.

David Fuller (Fullermoney) commented as follows: “As the world’s most important commodity by far, this surge in the oil price is bearish for the majority of stock markets. Consequently I would assume that rallies seen since March have either been capped or are unlikely to make much upward progress until investors see evidence that crude oil has commenced a medium-term correction.”

The FOMC released the minutes from its April 30 meeting on Wednesday. Members acknowledged uncertainty about what constituted

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The Bureau of Labor Statistics told us the other day that gas prices are down. The Fed has been blathering on for months about how inflation is “contained.” Unfortunately, here in RealityLand, that doesn’t fly. In fact, there’s a great story in the Washington Post today about how gas prices are rising so quickly that some older gas stations with analog pricing mechanisms can’t keep up anymore. The little pricing wheels stop at “$3.99.” Here’s an excerpt …

“Like a lot of small-scale entrepreneurs, Cathy Osborne worries that she’ll go out of business if fuel prices rise above $4 a gallon. Not because she won’t be able to buy gas at that price, but because she won’t be able to sell it.

“The old mechanical gas pumps with scrolling dials at her country

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