Related info from last week.

[Sources: April Finan. Times, Bloomberg, wires]

COMMODITY PRICES SOAR, RATE OF INCREASE OF THE SUPER-INFLATION INCREASES, DEFINING HYPERINFLATIONARY BLOWOUT. Lyndon LaRouche's September 2005 "Hyperinflationary Patterns" emphasizing its Riemannian shock-wave model, is unfolding fully in the commodities field.

Fools are pouring in money on each twitch of the market. "There is a wall of investment money moving into commodities markets," said UBS analyst John Reade April 12. "We estimate around $100 billion was invested via the Goldman Sachs index, the Dow Jones/AIG index and products tracking those [commodities] indices at the end of 2005." The cited investment funds are invested into so-called "passive indices"; they mimic the performance of commodity prices. However, there are hundreds of billions of dollars more that are invested in "active funds" that are "actively" invested, which if taking long positions, forcefully push up commodity prices. The size of all investment in commodities could be one-quarter trillion dollars or more; moreover, this is coupled with sizeable leverage.

The commodities prices' defining characteristic is an increase in the rate of increase. For example, between March 31, 2003 and Dec. 30, 2005 (the last day of trading), the price of palladium rose from $170 to $257 per ounce. For that whole 33 month period, its rate of price increase was 51.1% rate; its average rate of increase came out to a hefty 18.6% per year during that span. However, since the start of the year, palladium's price has subsequently jumped from $257 to $348 per ounce by April 12, which were it to continue, would come out to an increase 132% for the year 2006.

Between March 31, 2003 and Dec. 30, 2005, a metric ton of aluminium increased in price at a rate of 13% per year; for 2006, its annual rate of increase is 72%. For a metric ton of zinc, between March 31, 2005 and Dec. 30, 2005, its price increased at a considerable—inflationary—rate of 55% per year; for the year 2006, its annual rate of increase is 220%.

This underlying process of Weimar Germany is exactly as LaRouche forecast last September.

However, the bankers have built such a speculation-laced financial system that whatever they would do to try to save one bubble, will rupture another. The central banks could attempt to break the commodities price spiral by "traditional central banker methods," i.e., raising interest rates. However, the U.S. housing bubble is beginning to contract, severely affected by the rise in mortgage interest rates during the past nine months. An increase of interest rates by 1 to 2 percentage points would puncture the U.S. housing mortgage bubble, which counting the derivatives of Fannie Mae and Freddie Mac, totals $15 trillion.

WASH DC, April 11 (EIRNS)—A CITIBANK VICE PRESIDENT BACKED UP ROBERT RUBIN'S WARNING THAT THE US HAD BETTER CORRECT ITS ECONOMIC POLICIES OR IT WILL CREATE A GLOBAL DISASTER. Michael Andrews, a Citigroup VP for International Business Affairs, speaking at a Washington conference on Thailand, was asked by EIR to comment on the recent speech by Citigroup's Robert Rubin, warning that the failed US economic policies were driving the dollar towards a collapse. While the audience tittered, Andrews responded most seriously, saying that, while his friend of 22 years was not speaking for the Bank, Rubin was "sending out a warning shot, that US economic policies must be reformed, to contain the debt, and deal with the imbalances. What determines currency exchange rates is ultimately the underlying economic policies—if they are unsound, that will eventually show itself in exchange rates." He then discussed the continued strength of the Thai economy, but added: "If your characterization of the dollar fall is realized, it will do a great deal of damage throughout the world."

[Source: San Diego Daily Transcript, April 10; FDIC]

FEDERAL DEPOSIT INSURANCE CORPORATION ON MARCH 23 HELD A FORUM ON THREATS FACING BANKING SECTOR, HIGHLIGHTING A REAL ESTATE BUST. The FDIC, which bails out a failed or failing bank, described the roundtable as "scenarios for the next U.S. recession," citing three key economic and banking risk concerns—energy price spikes, a housing slowdown, and mounting household debt. In particular, "changes in the structure of mortgage lending could pose new risks to housing," through interest-only and payment-option mortgages, causing "significant payment shock" for borrowers and losses for local banks and thrifts.

Bank exposure to mortgage and home equity lending is now at peak levels, the FDIC said, as 1 in 4 family residential mortgages and home equity lines of credit have risen to account for a combined 28% of total loans and leases in the fourth quarter of 2005.

[Source: WSJ B1, April 12]

HOTTEST HOUSING MARKETS NOW COOLING THE QUICKEST. Double-digit declines in sales are hitting areas that have seen the biggest price surges in the last 5 years—Florida, California, and Washington D.C. The months-long "drop-off in sales and rising supply of homes could soon put downward pressure on prices." The slowdown reflects: 1) many speculators have started to dump homes; 2) high prices and rising interest rates have reduced affordability; and 3) potential buyers of second homes have pulled back.