I gave 2 more radio interviews on Friday, and one, if you can believe this one... At 7:20am yesterday! On a Sunday morning! The problem for me was I knew in the back of my head that I had to get up early on Sunday, so from 4 o'clock on, I couldn't sleep! UGH! Anyway... The central theme I kept coming back to was this "Stimulus Package"... Too much, too little, too late! I keep getting asked... Will this Stimulus Package work, will it avert a recession?

Well... Unfortunately, I was heard to say several times last week, the recession train has already left the station, so the Stimulus Package is too late! Then I would go on about how the checks aren't going to go out until May or June, which means that most people will be so behind at that time that they will simply sign over the check to the credit agency that's hounding them most! And in the end... The Gov't added $150 Billion to a Budget Deficit that was already forecast to reach $250 Billion this year!

When will they ever learn? When, will, they, ev-er learn? But not to worry folks... U.S. Treasury Sec. Paulson is hailing this Stimulus Package as the best thing since sliced bread! But then, wasn't he the one telling us back in August the housing meltdown has bottomed? Ahhh, yes, it was... The very same person... So, why would you believe this guy now?

The Fed has turned its back on inflation folks... And here's some items that you won't see in the CPI data...
1. Grade-A Large Eggs - Dec. 06 $1.54 a dozen... Dec. 07 $2.10, and current $2.73 a dozen... That's up 36% in a year!
2. White Bread - Dec. 06 $1.13 a loaf... Dec. 07 $1.28 a loaf, and current $1.62 a loaf... That's up 12.6% in a year!
3. Whole Milk - Dec. 06 $3 a gallon... Dec. 07 $3.87 a gallon, and current $3.93 a gallon ... That's up 29% in a year!
4. Fresh Whole Chicken- Dec. 06 $1.06 per pound... Dec. 07 $1.17 per pound, and current $1.19 per pound... That's up 10.3% in a year!

These are the things I talk about all the time, in that an individual can feel the inflation eating away at this wallet... This is just some simple food items... I'm not even talking about things like: Tuition... Insurance... Medical... Movie tickets... And so on...

Your Federal Reserve has turned their backs on inflation eating your wallet folks... Isn't that SAD?

Oh... And last week, there were rumors going around that the Fed panicked when they heard about the rogue trader from Soc. Gen. and cut 75 BPS to save stocks here in the U.S.... I'm not buying that one... They may seem like dolts in the way they've turned their backs on inflation, but I don't think they were duped into that one... I think the Fed has their eyes on the credit crunch going on and is doing everything in their power to "inflate" the mortgage bubble again!

So, that means, that all those that believe the Fed cut 75 BPS to save stocks last week, have thrown out the 50 BPS cut at their regularly scheduled meeting on Wednesday of this week... And all those that don't believe that, and believe that Fed is reacting to a financial crisis of the making here in the U.S... Still have the 50 BPS rate cut on the board for Wednesday's meeting.

You know which camp I'm in... I told you my thoughts on interest rates last week... But in case you missed class that day, let's go to the Pfennig archives to see what I had to say from Wednesday's Pfennig... "But seriously, 50 BPS next week... And here again, I'm going out on the limb (not to worry I found a big strong branch!) I believe we'll see 50 BPS cut at the next two meetings following next week... So... Add those together, carry the one, and you have 150 BPS still to go... That would bring rates here in the U.S. down to 2%"

Over in Euroland... Austria's Chancellor, Gusenbauer, was talking tough yesterday... Let's listen in on his speech... "a cut in interest rates by the European Central Bank (ECB) would send the wrong signal to investors and Consumers as economic growth remains... Solid!"

Again... This question keeps going around the table... The U.S. in a recession causes a recession in Europe and Asia too, right? Not so fast Tim! Keep in mind that yes, it causes a slowdown... But a recession? I doubt it... 80% of all Eurozone trade is amongst themselves... Doesn't sound like they necessarily need the U.S. going great guns does it? And Asia? The same could be said for them if they kept tallies like that! But they don't!

OK... How about that Super Ball Bounce in Gold last week? WOW! 3.3% gain in a week! And why not? Inflation is killing us, as I highlighted above.. And inflation in China is high, along with India... So... Demand for the shiny metal as a hedge VS inflation is strong... I've been telling people for more than 5 years now that Gold is historically, an excellent hedge VS inflation, and a lot of you laughed, and said... Well that's all fine and good, but we don't have any inflation! HA, look who's laughing now?

I'm like the 3rd little pig that built his house of bricks... But instead I built mine of Gold... I'd like to see that old inflation wolf come blow this down! Not gonna happen! That dog's not gonna hunt!

The pound sterling has really thrown a spanner in the works for the Bank of England (BOE)... Pound sterling gained VS the dollar last week... It's been a month or two of selling for sterling, so the gain last week was welcomed by sterling holders... I did some research into why moved sterling so much to the upside... And while the Big Dog, euro, was gaining and taking sterling with it, there was more... And there it was! A Merger & Acquisition... (M&A) Carlsberg and Heineken purchased Scottish & Newcastle PLC... The deal was about 7.8 Billion sterling... Now, that will light a fire under a currency, eh?

But... Since this was a one time deal, I caution you to be careful with sterling... The Bank of England (BOE) will be cutting rates soon enough, and when they do, I imagine the wind will come out of sterling's sails...

Back to the Eurozone for a minute before heading to the Big Finish... I saw, over the weekend that Eurozone Money Supply had narrowed in December. Good for them! For Money supply is in its truest form... Inflation! The European Central Bank (ECB) uses Money Supply growth as a gauge for fighting inflation. ECB President has stated a few times how he was not happy with the excessive money supply growth... So, it was nice to see it narrow... Now... It would be even nicer to see it narrow to a workable number!

Money Supply in the Eurozone narrowed to +11.5% growth in December, down from November's 12.3% growth... I would have to think that at 11.5% growth, the Eurozone isn't seeing any "credit crunch" , eh? That's a good sign for the economy folks... And a bad sign for inflation, which I believe the ECB has done a good job of keeping in line... I don't look for rates to come down here... Just yet... And that should continue to underpin the euro!

You know... I believe I was, if not first, one of the first, to tell you that the next problem stemming from the sub-prime / mortgage meltdown would be the bond insurers... And that certainly came front and center! I have to tell you that you should be concerned with this situation... There are reports that it might take up to $200 Billion to bailout AMBAC and other bond insurers... This is a BIG STORY going forward folks... Keep an eye on this one, it is persistent and scary!

All this is good for the price of PM's. Bad for the USA. Good for NOT!

Goldfinger