Oil Is Going Back To $150, Widespread Inflation To Take Hold

The charts are suggesting that the price of crude oil is likely going to go much higher. The price of crude continues to rise, despite no near-term supply constrictions. In fact, we have been told by traders, oil executives, and politicians that there is plenty of oil in the world - but the price just continues to rise. When the unrest in Egypt and then Libya sent oil surging, many market participants believed that it was a temporary phenomenon and that crude prices would return to the mid-$80 level in short order. That has not happened. This was not a terribly difficult development to see coming. Oil is simply catching up to other commodities such as gold, silver, cotton, sugar, corn, and wheat, all of which have skyrocketed. The catalyst for the commodities trade has been two-fold: First, global money printing in the wake of the financial crisis has sparked inflation and fears of more inflation. Second, the global economy has been recovering, albeit choppily and slowly, and this has boosted demand. Crude is just now beginning to react to these dual catalysts, whereas other commodities that had more bullish supply/demand fundamentals got a head start. Do not be surprised if all commodities go back to, and then exceed their 2008 highs. The destruction of the Dollar is fully underway, and the claims by the Fed that they are not "monetizing the debt" are completely and utterly false. They are monetizing the debt! That is their best option, and likely the only option. The economy (and the Treasury) simply cannot digest higher interest rates and significantly lowered government spending - it will cause another recession and possibly a depression. The job and housing markets, in particular, are telling us this. The people in charge are bankers and politicians. These people have absolutely no long-term view. None. They think in terms of election and bonus cycles. Furthermore, deflation, which is what we will get without quantitative easing, budget deficits, and ZIRP interest rate policy, is like kryptonite to bankers. The largest U.S. banking institutions remain highly leveraged. Canadian hedge fund manager Eric Sprott said just the other day that by his calculations they remain leveraged 20-1. This means that a 5% fall in the value of their assets would wipe out their capital. Hence, deflation is kryptonite to bankers. It would ruin them all over again just like it did in 2008. Politicians, given a choice between recession/depression and inflation, will always choose the "kick the can down the road" option - i.e. inflation. Investors, prepare yourself, we are just getting started.