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1. The dollar rose 2 percent against the euro this week, longest rally since February 2006: The U.S. dollar traded higher against the euro on Friday with help from a government intervention, a sell-off in oil prices and growing opinions that economies elsewhere may slow faster than in the U.S. The dollar has risen 2 percent against the euro this week in its longest stretch of weekly gains since February 2006. “A profound shift in investor strategy over the last month has set off a powerful dollar rebound and a flight to relative safety in U.S. assets. What started as a U.S. financial crisis is morphing into a global economic crisis. Investors now expect a downturn of such intensity that it will prevent inflation from taking hold,” said David Bowers, chief consultant to Merrill Lynch, according to the London Telegraph.
2. Gold fell below $800/oz., down 9 percent for the week while silver slid 20 percent: Gold is being treated like a commodity when in fact it is the ultimate currency. When investors finally realize that, the rush to buy gold will be overwhelming. One year ago gold traded at $650/oz. and the Dow traded at 13,000. Today gold is trading up 20 percent at $785/oz. while the Dow is trading down 11.7 percent at 11,636. So, although gold has suffered a 22 percent drop from the $1,002 high, the shiny yellow metal is still running circles around stock indexes year over year. (Full commentary on Sub-$800 Gold)
3. Crude oil prices fell 1.2 percent on slowing demand despite geopolitical worry: Crude oil prices fell $1.24 to $113.77 a barrel on Friday despite government data this week showing a surprise fall in crude stockpiles and a bigger-than-expected slip in gasoline reserves last week. For the week, oil prices fell 1.2 percent. Concerns over a deceleration in global oil demand were offset by news that Russia’s military conflict in Georgia is expanding. Crude prices fell 7.9 percent last week, as supply fears eased and as the firmer dollar prompted funds to exit commodities.
4. Inflation rose .8 percent in July, up 5.6 percent annually, up 10.6 percent in the past three months: The CPI has surged at a 10.6 percent annualized rate in the past three months, the second-worst spike in inflation in the past 26 years, according to reports. Consumer prices shot up 1.1 percent in June, the fastest pace in 26 years with two-thirds of the surge blamed on soaring energy prices. “Coming to a store near you: Even HIGHER PRICES,” reports the Associated Press, which notes: “While most price increases have not been passed on at the retail level, it is inevitable that they will be at some point.”
5. Stocks ended mostly higher for a second day Friday, but the Dow and S&P are flat for the week: On Friday, stocks closed mostly higher for a second day, getting a lift as bond insurers Ambac and MBIA Inc. had their credit ratings affirmed, while crude oil’s ongoing decline boosted hopes for higher consumer spending,” reports Market Watch, which adds: “Robin Griffiths, technical strategist from Cazenove Capital told CNBC this week he expects the normal downtrend associated with a bear trend will resume in September or October as people return from the summer vacation season. He expects another big down leg in that period.”
6. Existing U.S. home sales fell to a 10-year low in the second quarter: The median price for a single-family house dropped 7.6 percent as the real estate recession deepened, reports Bloomberg. “One dollar can get you a large soda at McDonald’s, a used VHS movie at 7-Eleven or a house in Detroit. The fact that a home on the city’s east side was listed for $1 recently shows how depressed the real estate market has become in one of America’s poorest big cities,” reports Detnews.
7. Georgia signed a cease-fire agreement with Russia, with the help of Condoleezza Rice: Georgian President Mikhail Saakashvili said Friday he signed a cease-fire agreement with Russia that protects the former Soviet republic’s interests despite concessions to Moscow. Secretary of State Condoleezza Rice, standing beside the pro-American Georgian leader, said she had been assured that Russian President Dmitry Medvedev will sign an identical document, reports AP. “Russia threatened a nuclear strike against Poland after a landmark deal to site American global anti-missile shields in the country,” reports the London Telegraph.
8. Institutional investors expect another big financial firm to collapse in six months: Most institutional investors expect another big financial firm to collapse in six months because of the credit crunch, a survey by Greenwich Associates shows, according to the Financial Times. And CNBC reports: “More U.S. banks may fail after the collapse of mortgage lender IndyMac Bancorp, straining a financial system seeking stability after years of lending excesses. ‘More than 300 banks could fail in the next three years,’ said RBC Capital Markets analyst Gerard Cassidy.'”
9. Film ‘I.O.U.S.A.’ debuts Aug. 21 to teach Americans about the dangers of debt: U.S. consumer credit/debt expanded at the fastest rate in seven months in June as Americans turned to their credit cards to keep up spending in the face of rising food and energy costs. On Aug. 21, various movie theaters around the country will play a documentary titled “I.O.U.S.A.” to teach Americans about the dangers of debt. Three financial big shots taking to the stage to give Americans a good talking-to about the country’s sloppy debt habits: Warren Buffett, Pete Peterson and former Comptroller General Dave Walker.
10. U.S. unemployment jumped to 5.7 percent last month, a four-year high: The Labor Department reported that non-farm payrolls fell for the seventh straight month in July. “A trio of crises – housing, credit and financial – have badly bruised the economy. In response, employers have cut jobs for six months in a row, bringing total losses this year close to a staggering half-million – 438,000. GDP increased at an annual rate of 1.9 percent in Q2. That marked an improvement over the feeble 0.9 percent growth in the first quarter and an outright contraction in the economy during the final quarter of 2007, reports the Associated Press.
For the latest updates, Monday through Friday, to the top 10 economic stories of the week, visit Real Money Perspectives.
For WND commentary by Craig R. Smith, visit his commentary archive.