As Bush writes a blank check to New Orleans Gold goes 17 year high – world ready to dive into a catastrophic stagflation
Rita Parikh
Sep. 17, 2005

Gold made relentless highs and ended the week with scores never seen in the last 17 years. It happened at the same time when George Bush promised the New Orleans and Gulf Coast of United States a real black check for doing all that is needed at the cost of staggering US deficits.

Gold rallied against all currencies – not just dollar. The increasing US budget deficit calls for stagflation. The consumer confidence in the US economy plunged. The inflation pressures as predicted by energy, commodities and metals spiked upwards. The jobless claims soared to the highest in many months.

Stagflation is back. It is a phenomenon where inflation is rapid but the corresponding growth in the economy is missing. It make all poor. The poor struggles to keep up to the increasing cost. The middle class drifts towards poverty and the rich starts hiding behind precious metals instead of following supply side economics.

As US economy faced dreadful stagflation, the world economy will also plunge into similar problems. India and China is about to plunge into a deep depression in spite of their go-go economy as manifested by mews reports now.

The energy price escalation will hurt India and China the most as these socialist and communist countries try to subsidize energy prices to its citizens.

What was real alarming is the total collapse of US consumer confidence while price deflator showed enormous amount of inflation. Hurricane Katrina delivered a serious blow to US consumer confidence, sending it to its lowest level for a decade in September, according to figures released on Friday.

The University of Michigan’s widely-watched initial sentiment index for September slumped from 76.9 from 89.1 last month - more than economists had expected. The worst deterioration came in the longer-term measures, with the index for the one-year outlook dropping 37 points. Expectations about the future fell even more, with the index measuring the outlook for the year ahead down at its lowest level for almost 13 years.

But economists warned that the sentiment numbers were volatile and cautioned against reading too much into the one report. Economists will have to wait until October, when the full months figures become available, to assess the true impact of Katrina.

“The index was likely weighed down heavily by the emotional response to the devastating images,” said John Ryding, chief US economist at Bear Stearns, who thought the sudden spike in petrol - which is already subsiding - had a big effect on economic confidence.

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