As is already well known, inflation has begun to spread throughout the financial markets and world economy.

As you can see, commodities of all kinds are soaring. You’ll note, in particular, that agricultural commodities have been top performers, trailing only Silver in price appreciation. However, this performance is even more significant when you consider that it occurred in half of the time period measured above.

Indeed, Agricultural commodities were laggards during most of QE 1. It was only when the Fed introduced QE lite in August ’10 and QE 2 in November ’10, that Agricultural prices began to explode higher:

As you can see, The Rogers Agricultural index only broke above its multi-year resistance level after the Fed indicated it was going “all in” on its reflation efforts with QE lite.

This in turn has resulted in riots and revolutions worldwide. Already we’ve seen this occur in Tunisia, Algeria, the Ivory Coast, Egypt, Libya, Bahrain, Iran, and now Saudi Arabia. We’ve also seen the start of this in China.

The primary driver of these situations has been higher food prices. Food accounts for 50% of spending in many emerging markets. With food prices hitting record highs and going higher, many folks are literally starving. As a result, they’ve become violent and are moving to overthrow the elites in control of their countries.

This situation is a stark warning of what’s to come in the US. While many believe the US is immune to this kind of disorder, ZeroHedge recently noted that the US has a similar wealth gap to most emerging markets:

The reasons the US hasn’t been gripped by riots are the following:

1) The security nets (food stamps, welfare, etc) continue to keep lower income Americans afloat… for now.

2) Food in the US is so processed that increases in agricultural prices don’t pass through as rapidly into higher food prices.

Neither of this will last much longer. Regarding #1, the US Government is broke. In fact they’re so broke than an aid to Nancy Pelosi (who I can’t stand) has revealed that the US Government might actually shut down at some point in the near future.

As for #2, commodities will be spiking even higher once the following is digested by the markets:

This is the weekly chart for the US Dollar. As you can see, we have just broken the multi-year trendline. What does this mean? That the momentum that maintained the US Dollar from the 2008 lows has been BROKEN.

It is literally now “do or die” time for the US currency. If the US Dollar does NOT rally HARD right now… then we’re triggering the massive H&S pattern in short course and on our way to a 50% devaluation:

Get Ready Now!

Graham Summers

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