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Saturday, November 03, 2007

Put your fingers in your ears

Doug Noland at Prudent Bear (November 2) agrees that bigger bangs are coming:

... as an analyst I must contemplate the likelihood we have entered a uniquely unstable monetary environment. In short, the backdrop exists where incredible dollar liquidity flows could be released (from myriad sources) upon key things (notably energy, food, metals and commodities) already in severe supply and demand imbalance. Again, how much are the Chinese willing to pay for energy? The Russians for food? The Indians for commodities? How much will investors be willing to pay for precious metals as a store of value? How aggressively will the speculators "front run" all of them? Can the Fed afford to fuel this bonfire?

... The least bad course for the Federal Reserve at this point would have a primary focus on supporting the dollar and global financial stability.

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