continentaleconomics.com Blog

1. Ron Paul elected president of the US

2. S&P 500 falls by 25 %

3. Chinese stock market falls by 40 %

4. Grain prices double again

5. Oil price hits $ 175

http://www.saxobank.com/advertisements/Outlook2008_front.pdf

Comment: Quite moderate, after all. If that is it, 2008 looks like being a good year - at least for the more sane investors who are already prepared, including, I guess, many of the readers of this blog.

posted by Antony Mueller

Experience the American century with Robert McNamara in this interactive video based on the Errol Morris documentary “The Fog of War”:

http://www.sonyclassics.com/fogofwar/

NEW YORK (AP) — Gas prices rose back to $3 a gallon at the pump Friday, following rising futures prices on concerns about tight inventories and potential supply disruptions.

http://biz.yahoo.com/ap/071228/oil_prices.html

 German inflation rate yearly and monthly

Dec. 28 (Bloomberg) — Brazil’s real headed for a second consecutive weekly gain on speculation foreign investment will keep flowing into the local stock and bond markets in 2008.

“The yield differential on our bonds and upside potential for stocks will be key positive factors for the real next year,'’ said Andre Delben Silva, a partner at Advisor Asset Management, a Sao Paulo-based firm with 500 million reais ($284 million) under management.

The real has risen 1.6 percent this week. It has advanced 21 percent this year, the biggest gain among the 16 most-traded currencies against the dollar. -

http://www.bloomberg.com/apps/news?pid=20601086&sid=aqFxIKeUiVlA&refer=news

Dec. 28 (Bloomberg) — The dollar’s share of global foreign-exchange reserves fell to a record low in the third quarter as demand for U.S. assets waned after the subprime- mortgage market collapsed.

The dollar accounted for 63.8 percent of reserves at the end of September, down from 65 percent three months earlier, the International Monetary Fund said today in Washington. The euro’s share rose to 26.4 percent from 25.5 percent. IMF quarterly figures go back to 1999, the year the euro was introduced. -

http://www.bloomberg.com/apps/news?pid=20601103&sid=a2O1PM.i.kIY&refer=news

Comment: It’s high time to get ready to face the global political consequences of the demise of the dollar - see “Dollars and Politics”: http://www.mises.org/story/2461

Dec. 28 (Bloomberg) — Corporate bond sales fell in Europe for the first time since 2002 this year as companies abandoned borrowing because of soaring interest costs.

Sales slumped to 285 billion euros ($417 billion) in the last six months from 616 billion euros in the first half, reducing the total for the year by 3 percent from 2006, according to data compiled by Bloomberg. Companies with ratings below investment grade haven’t sold any bonds in euros or pounds since August, the longest shutdown in at least nine years.

“I’ve been in this business for 20 years and never seen anything as bad as this,'’ said Eirik Winter, co-head of fixed income capital markets in London for Citigroup Inc., the third- biggest underwriter of corporate bonds sold in Europe. “We’re going to feel 2007 for a long time.'’ -

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1iwjEF2RGc4&refer=home

Background analysis: Antony Mueller - “Financial Cycles, Business Activity, and Asset Valuation” - webcast: http://www.newmedia.ufm.edu.gt/pagina.asp?nom=muellerfinancial

Dec. 28 (Bloomberg) — Japan’s inflation rose at the fastest pace in more than nine years in November and industrial production and household spending declined, signaling rising oil costs may derail the economy’s longest postwar expansion. -

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSMX6dZkcI6Q&refer=home

Interesting quicky debate between Shiff and “Mish”:

Comment: as of now I’ll side with Schiff although with a different line of reasoning that both debaters miss: what we’re in is a supply contraction while the mass of money is still out. The sequence I see is: supply contraction - money becomes demand - inflation - more supply contraction - hyperinflation - debt collapse - deflation.

Background paper: http://continentaleconomics.com/files/MonetaryPolicyandtheBusinessCycleCEIWP2007.1.pdf

Video presentation: http://www.newmedia.ufm.edu/pagina.asp?nom=muellerinflationmacroeconomic 

A new version of my paper is in the making and should be available on the main site soon: www.continentaleconomics.com

posted by Antony Mueller