FISCAL CONNECTIVITY:

Thinking About Spring

by Fred Cederholm
How much of the food concerns are reflected in the unrest in the Middle East which contributes to the oil concerns, which contribute to the Dollar concerns, which contribute to the spike in precious metals, which contribute to the...

I’ve been thinking about Spring. Actually I’ve been thinking about the seasons, a time of rebirth, driving, gasoline, the oil companies, the US Dollar, precious metals, and food. We are beginning to see the first signs of real Spring. The changes in seasons have always been fun to watch. I have said “goodbye” to Winter some time ago, even before we saw our last snow, sleet, and ice storms. I am ready for Spring because it is a time for rebirth. The animals are coming around, the bulb plants are springing, up, and it is time to get the John Deere ready for another Summer of mowing (ARGH!!!) I am always renewed, or sense a feeling of turnaround, with the arrival of Spring.

You see I tend to hibernate during the bleakness of Winter. I catch up on my reading and video watching, I research topics, and I at least TH*NK about getting my house in order. I would normally already, like so many others, be starting to enjoy drives just for the sake of the ride to view the seasonal shift. Right now, I don’t have a car, but hopefully Krahenbuhl’s will take care of that deficiency in a couple of more weeks. I still do not physically feel up to driving quite yet, but I will. I know I will.

The real driving season (for pleasure and fun) doesn’t traditionally begin until Memorial Day at the end May. I am already sensing that such car junkets will be greatly curtailed in 2011, because in 2011 we will see an even greater “greed factor” at work at the gas pump. Gasoline is already at $3.88 across America. In parts of Chicago, it is already a dollar more. $5.00 + gasoline is coming!

The global contract price for crude oil hit $112 a barrel today and North Sea Brent is now trading at $125 a barrel. The problem is THAT is for June delivery --- some five to nine weeks from now. The time lag between crude arrival, and gas at the pump, is another four to six weeks. Yet, we have seen increases of 10 to 20 cents a week to reflect these future rises in the price of crude. It has been said that if someone overeats in the Middle East at breakfast, the “gas” will be passed at the American pumps by lunch. The oil companies are already postured for record profits in the second quarter of 2011. More pump price increases are in our future. 2011 will prove a costly time for all energy. These increases will flow thru the entire weakened economy and should be more than enough to eliminate any myths of recovery.

The US Dollar continues in its downward spiral. It is languishing at a two and a half year low relative to the other currencies on the planet. While oil and gasoline may be headed up the Dollar has no place to go but further down. The Quantitative Easing 2 is scheduled to end on June 30th. The $800 BILLION program to print money to “buy” US debt instruments has already been pretty much used up. It doesn’t take long when you are using up $3.8 BILLION of the newly printed cash each and every day to cover the war costs and other government deficits. The QE2 program has benefited few beyond the Wall Street Banks and the US Treasury. It is merely buying more time for the OBama administration, but has solved nothing and will continue to solve nothing! It should prove interesting to see what the FED and the Treasury can come up with to replace it. Their arsenal of tricks is now out of ammunition. It is hard cut interest rates as a stimulus when the FED already has them at zero.

The decline of the “Buck” and the continued increases in crude oil have had their impact on the prices of precious metals. Gold is now at $1,500+ and silver is cracking $50 an ounce. These are all time record highs and more increases are expected here as well. If anything the price of silver is way out of sync with the historical 16 to 1 ratio with gold. This ratio reflects the roughly 18 to 1 projections between the rarities of the two metals. (Where does one look to find a safe place to invest one’s savings --- for those lucky enough to have savings in these troubled times?)

Globally food shortages and spikes in the prices of basic food items are matters increasing concern as well. How much of the food factors are reflected in the unrest in the Middle East which contributes to the oil concerns, which contribute to the Dollar concerns, which contribute to the spike in precious metals, which contribute to the ... One glitch seems to lead to at least seventeen others in this global mess of a worldwide economy. I just wish I could hop into my car and enjoy a nice Spring ride with my little dog, Mac II!!!

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.


Copyright 2010 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.



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This story was published on April 25, 2011.