Via Business News Network
Previous post of Paul Van Eden's Analysis

This is the chart of Crude Oil vs. Current Money Supply. (Isn't it astonishing chart?) The fact is excess of money supply causes price to rise and that is called inflation, not other way around.

One argues that but price didn't rise from mid 80's to late 2000 despite of increasing of money supply. But reply from Mr. Paul is not surprised. He says,"Amount of exploration in late 70's & 80's caused enormous amount of production capacity in oil by major oil companies & made oil cheap. The effect was Americans got used to very cheap oil."

Furthermore, by explaining this chart below where price of oil is adjusted by money supply by Federal Reserve he says that current price of oil should be near $3.00/barrel if there was no money supply from 1959-2008. From near $3 to $135 price hike is caused by money supply and from $0 to near $3 is caused by supply-demand.
If one applies same money supply analysis with Gold, he/she shouldn't be surprised. Below here, chart of Gold from 1975 to 2008 completely matches with Oil & money supply. The difference is Oil rose faster than actual rate of inflation in parabolic pattern like gold did from 1979 to Jan 1982.
So result will be, oil could make new support near $100, but it's not going down further. It's only going up in future because we are already observing free use of money supply by Fed. So, I am not surprised when some analysts saying that oil will be reaching to 200+ & same is true with Gold & Silver.

The good news is, when Fed raises interest rate like Paul Volker had to in mid 1980's, current profit of oil companies will worth more in Dollar terms & it'll help them to increase production capacity by increasing oil exploration. But it's not coming soon until we bottom in financials.

"The government-chartered companies, which own or guarantee about half the $12 trillion of U.S. mortgages, can count on a federal lifeline, said Republican Senator John McCain, of Arizona, and Democratic Senator Charles Schumer, of New York." - Bloomberg Report

Fannie Mae & Freddie Mac- too big to fail?
http://www.cnbc.com/id/25638740

It looks very confirmed that FNM & FRE will get Government Bail Out. It is gonna be really ugly, if that happens. US Government already has too much spending & unstoppable rapidly growing money supply and now about 5 Trillion Dollar bail out. Fed is gonna print more money to do that. Federal Reserve has already printed about 4 trillion in last three years. Once all those money go into circulation, too many dollars will decrease the purchasing power big time & inflation will kick in at faster rate. Lehman Brother is on it's way to become another Bear Sterns. Very few signs from Fed to raise rates by end of year. May be bottom will come faster than expected.

Money Supply


What is this MZM, M1, M2, M3? http://en.wikipedia.org/wiki/Money_supply

Consumer Price Index- InflationCurrent Account Balance
Commercial Banks CreditIn conclusion,

• Bad news for US Dollar, US Tax Payers & Global Equity Market.
• Good news for EUR, AUD, GOLD, JPY, CHF, SILVER, OIL.

Data Source:
Federal Reserve Bank of St. Louis