The battle of the central banks chairman, get ready to rumble! In this corner from the Harvard School of Economics and professor at Princeton University coming in as a heavy weight and Federal Reserve Chairman, big, bad and no doubt bold, Ben Bernanke! And in the other corner hailing from Lyon France, graduate of the University of Paris and the Insitut d’etudes politques de Paris and now the European Central Bank President, the light weight Jean-Claude Trichet... Keep your dukes up, no hitting below, and come out swinging! The two big boppers of the worlds central bank seem to be out of step and at odds with the issue of how to fight rising inflation. It seems that European Central Chairman and president of the European Central Bank just threw his American Counterpart Fed. Chairman Ben Bernanke under the bus. Good thing the cost of diesel is so darn expensive so the bus probably did not have enough fuel to run over him not to mention traffic with the truck strikes in Europe. Yet the way the price of oil rallied after Mr. Trichet spoke means this guy is either oblivious to what the market telling us or it is clear that this guy is not going out of his way to do us any favors.

The point is that Jean-Claude Trichet in the polite way that only the French can muster basically dismissed Chairman Ben Bernanke comments on how the weak dollar was feeding inflation and cementing inflation expectations.  Trichet says ‘As regards to the US Dollar I would only say that I had always appreciated as you know, what was said” by Fed Chairman Ben Bernanke and particularly last Monday on what he considered opportune from the US standpoint. (Opportune?) It has been noted by markets as some thing important and had my self frequently here told you that I considered very important what had been said by Ben Bernanke and by Treasury Secretary Hank Paulson as regards the fact that a strong dollar was in the interests of the Untied States of America”. (As a strong Euro might be in his self interest?)

Mr. Trichet basically said, “sorry Ben the dollar is your problem and don’t look to Europe to help you out.” In fact, look for Europe to squeeze you because we are raising rates to squeeze you and drive you into recession because we are in better shape to handle it.    

Trichet is saying dam the dollar it is not right to use monetary policy to support a currency or to influence oil prices even if that currency is the world currency of all commodities. Why can’t he see that the dollar woes are adding to the costs of oil?   

When Mr. Bernanke earlier this week acknowledged the weak dollar and its impact on inflation those comments shook the oil bulls and the commodity funds to their dollar hedging foundations and the dollar rallied and oil plummeted. Yet despite the obvious positive market reaction Trichet think he knows better. Trichet thinks that the price of oil has been totally driven by demand and inflation by consumption and the only way to cut inflation is to choke off growth by tightening monetary policy. So what if the dollar breaks into oblivion and oil soars to $200 a barrel and the US economy collapses then and only then can the Euro take its rightful place and rule the economic world.

Or maybe Trichet is just locked into the past and the 1970’s and does not get how globalization has changed the ways to fight inflation. Maybe he does not have the imagination and foresight to truly understand the current market dynamic. The Truth is that if he thinks inflation is a problem now just think how it will feel after the oil market rallied almost $10 a barrel after his snide little comments. Yes the strong euro may shield them from higher prices for a while but if he is worried about inflation being caused by consumption a strong euro in a global market will cause even more consumption of commodities put on sale by his interest rate increase that will lead to a weak dollar. He does not get that in the global foreign exchange market consumption can be increased by imbalances between the two foreign currencies.

This clarifies the debate in the oil market and probably the greatest debate of these modern economic times. What has driven oil? Is it only supply and demand or does the rest of the economic world effect the price of oil. Why has did oil start its parabolic move the day that the fed surprised us with a 50 basis point interest rate cut that signaled to the markets that the US mortgage banking system was in a whole heap of trouble.  

Why don’t you have the Fox Business Network there are no more excuses! Call your cable operator today! And if they don’t have it then you should move! Besides why would you want to live in a neighborhood that doesn’t carry the Fox Business Network?  I mean your neighbors would be so uniformed and boring so why would you live there?

And besides they do not get to see Liz Clamen and David Asmen so what fun would they be? And for more fun make sure you get with the energy Report Community! Sign up for your email blast and your access to Alaronenergies! Just call Phil Flynn at 800-935 -6487

I am sure glad you guys wanted for me to lower my stops!

Short July Crude from apprx 13200 stopped apprx 12700!!!!!

 Short July RBOB from apprx 34000 stopped apprx 32500!!!

Bought July 35500 raise stop to 369000!!

Buy July natural gas at 1220 stop 1170