Gold back to $900, Oil back over $125 as FDIC and Federal Reserve warn of further consequences of asset devaluation;  Dollar faces increased downward pressure and no new international support

For the last few weeks, American financial markets have largely stabilized - albeit at nearly record-low dollar levels and nearly record-high commodity costs.  Despite a bullish attitude in the media and among financial salesmen, the current rally is just a brief pause in the on-going financial storm.  While the Federal Reserve has supplied the liquidity to keep the system moving at all, the continuing expansion of credit will put more inflationary pressure on the dollar for a few more months. 

One hope among analysts was an interest rate cut at the European Central Bank:  The hope here being that if Europe followed the Fed's lead, the dollar could gain some ground back against the Euro.  While the ECB is warning about slow growth, their decision to hold rates steady was based on the stronger desire to confront inflation.  

Politics and government consumption loom menacingly on the economy's near future:  current expenses require acceleration of debt or tax rates that would make America distinctly uncompetitive for global capital investment. American voters are unlikely to support cost cutting or working class taxes, but the decision to increase corporate taxes would likely lead to a surge of off-shoring and businesses relocating to more favorable financial systems.  

The proposed spending plans of the remaining candidates would favor businesses with strong ties to the Pentagon, Federal Reserve, or alternative energy.  "Safe" plays for an American socialist economy would include General Electric - who recently announced it would abandon its home appliances division, JP Morgan Chase, and Lockheed Martin.

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Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved.