Barclays warns of a financial storm as Federal Reserve's credibility crumbles!

Dow Jones Industrial Average (DJIA) 1 month performance

(>1,000 pt. loss)

Hi everybody. This article released by The Telegraph in the UK pretty much confirms what I have been writing about and alerting you to prepare for with regard to the global economies, the global financial markets, your money etc. Since this article was released last week the financial markets have taken a nose dive, plus oil is hitting new highs currently at $144 and climbing. It is not a pretty picture to say the least.

Plus, ADP Employer Services said today that U.S. private- sector employers slashed 79,000 jobs in June, the largest drop since November 2002, stirring worries that the government's jobs report on Thursday may also come in weak. Click here to read more from a CNBC article. Therefore, please be grateful for the job you have now because 100,000s are without work and 100,000s more job losses are expected via Countrywide, BofA, Starbucks, General Motors to name only a few.

Please click here to read the entire article, seriously this is a MUST READ for everyone. I will post a few snipits.

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Barclays warns of a financial storm as Federal Reserve's credibility crumbles
Last Updated: 12:01am BST 28/06/2008
released by Telegraph.co.uk

US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.

The grim verdict on Ben Bernanke's Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank's dovish policy statement on Wednesday.

The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year.

Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s," he said.

"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."

Barclays Capital recommends outright "short" positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to "steepen" with a vengeance, causing a bloodbath for bond holders.

The bank said the full damage from the global banking crisis would take another year to unfold. [This is just the beginning folks]