• Print
• E-Mail

It will go up, he told Bloomberg. Oil is moving to a substantially higher level say above $125 a barrel.

But behind the curtain, the Wizard of the Printing Press Ben Bernanke is expanding the US money supply at a 17.5% annual rate on the M3 measure, its fastest growth in history.

Only Dallas Fed chief Richard Fisher is calling for an end to the hyper inflationist campaign at the US central bank. I have maintained a strong reluctance to further general monetary accommodation, he has said.

The answer is not to compound the bad by repeating the oft prescribed remedy of inflating our way out of our predicament, with a wing and a prayer promise that it can always be reined in later.

But the noble Fisher is out numbered by a wide margin at the Bernanke Fed.

Bank of England Lends a Hand

Within the G7 cartel of central banks, the Bernanke Fed has enlisted the support of two other members, the Bank of England and Canada, who have agreed to slash their interest rates and pump up their money supply.

This lends artificial support to the US Dollar in the foreign exchange markets, as the British Pound and Canadian Loonie move into similar over supply to that of the US Dollar. But as is often the case, the net result is too much money chasing too few barrels of oil and precious ounces of Gold Bullion.

Under heavy political pressure from British prime minister Gordon Brown, the Bank of England has abandoned its fight against global inflation. Instead, it has begun a series of rate cuts designed to put a floor under British home prices, which tumbled 2.5% in March, their biggest monthly decline since the early 1990s.

Annual British real estate price inflation fell to 1.1% last month, the slowest in 12 years, and could go negative as the credit crunch bites into the UK economy.