Top 10 economic stories of last week

1. Crude oil prices fell $6.59 to $114.59 a barrel Friday as dealers turned their focus to rising supply levels and weakening global demand. Thursday’s 5 percent gain was based on reports that “rising antagonism with Russia underscored the possibility it could affect energy shipments from the world’s second-largest oil producer. The weakening U.S. dollar, a fall in U.S. gasoline inventories and a possible output tightening by OPEC at its next meeting in September all helped push oil prices higher,” according to the Associated Press.

2. Gold prices fell over 1 percent on profit taking Friday, but ended the week with a 5 percent weekly gain, despite sharply lower oil prices and a stronger dollar. Gold last traded in New York down $14.20 to $821.40/oz., silver fell $.49 to $13.34/oz. “A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins,” reports Reuters. The gold bull market is now beginning the next stage. Prices today are at Jan 2008 levels, creating an excellent buying opportunity based on strong fundamentals.

3. The U.S. dollar index rebounded Friday as “a South Korean bank said it’s ‘considering’ an investment in Lehman Bros, indicating U.S. financial firms may weather credit market turmoil,” reports Bloomberg. “We are not witnessing a dollar rally so much as a collapse in European and commodity currencies. My fear is that the U.S. will tip into a second, deeper leg of the downturn, setting off a wave of savage job cuts. This will start to feel more like a real depression,” according to a column in the London Telegraph.

4. Inflation: “The inflation outlook remains highly uncertain because of the difficulty of predicting the future course of commodity prices, and we will continue to monitor inflation and inflation expectations closely,” Fed Chairman Ben Bernanke told a gathering of global central bankers on Friday, reports Reuters. Meanwhile, wholesale inflation surged in July at the fastest pace in 27 years. “Prices shot up 1.2 percent in July, was more than twice the 0.5 percent gain economists expected,” reports the Associated Press. “Most Americans will have to tighten their belts and accept lower living standards unless this inflationary spiral can be stopped,” added BusinessWeek.

5. U.S. stocks rallied Friday, boosted by a drop in oil prices and talk that Lehman Bros. may be acquired, while Ben Bernanke confirmed the Fed sees inflation moderating this year,” reports MarketWatch. Meanwhile U.S. leading economic indicators fell 0.7 percent in July, pointing to “slow growth the rest of the year, and possibly an economy grinding to a halt, Robin Griffiths, technical strategist from Cazenove Capital, told CNBC.

6. U.S. credit/debt: “If ‘An Inconvenient Truth’ sounded the alarm on global warming, ‘I.O.U.S.A.,’ a new documentary opening in theaters Friday, hopes to do the same for the rising federal deficit,” reports the Wall Street Journal. “The film’s inspiration comes from the 2006 book, “Empire of Debt: The Rise of an Epic Financial Crisis,” by William Bonner and Addison Wiggin, reports the Journal. “The film does not offer a detailed solution, but it does express restrained outrage at the immorality of one generation of Americans – you and I – willing to mortgage the futures of our children and grandchildren to satisfy our own selfishness,” reports the Atlanta Journal-Constitution.

7. Stagflation: This week’s spike in wholesale inflation, together with the worst housing data in over a decade, supports a growing stagflation argument. “The July inflation data had a strong stagflationary feel to it,” said ING economist Dimitry Fleming to the London Times. “There’s no doubt we’re in a period of stagflation now,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York, according to Bloomberg. “Stagflation is nothing less than a weapon of mass destruction aimed at the livelihoods not only of the elderly and those on fixed incomes, but also on students, the unemployed, families, and almost everyone who has a job in the producing economy,” reports Market Oracle.

8. U.S. housing: “U.S. home builders sharply reduced the number of new homes starting construction in July and dropped the number of new single-family permits to the lowest level in 26 years, the Commerce Department estimated Tuesday,” according to MarketWatch. “Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent as the real estate recession deepened,” reported Bloomberg.

9. Russia: “Waves of Russian military convoys rolled out of key positions in Georgia on Friday, and Russia announced it had fulfilled President Dmitry Medvedev’s promise. “The Russians have without a doubt failed to live up to their obligations,” U.S. State Department spokesman Robert Wood said. “Establishing checkpoints, buffer zones are definitely not part of the agreement,” reports UKpress. Secretary of State Condoleezza Rice and her Polish counterpart signed a deal to build a U.S. missile defense base in Poland, an agreement that prompted an infuriated Russia to warn of a possible attack against the former Soviet satellite. Russia’s Foreign Ministry issued a statement saying the U.S. missile shield plans are clearly aimed at weakening Russia, reported the Associated Press.

10. Banks: “The year-old financial crisis is not only far from over but could actually get much worse, bringing more big shocks to the U.S. economy and stock market,” a host of experts told CNBC Monday. “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, CNBC added.

NEXT WEEK: Investors not on vacation will be closely watching these economic indicators: Existing home sales on Monday, consumer confidence and new home sales on Tuesday, durable orders and crude oil inventories on Wednesday, 2nd quarter GDP and initial job claims on Thursday and personal income and spending on Friday.

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.