Gold

The price of gold has plowed through $1,000 in the last 24 hours. It has risen in fits in starts for months, because people were fleeing to it as a safe haven when equities sunk and interest rates were low. It hit $1,000 an ounce in March, but couldn't find any support at that level because people were even a little skittish about a "safe" investment given all the gloom and doom. This time the rally is being supported by inflation fears and by how we have weakened the dollar with all of our government spending and debt.

It would suggest that people think the worst of the global recession is over (good news at least) and they are now worried about inflation on the horizon (really bad news). This is where I believe we will end up paying for the U.S.'s disastrous (my opinion) fiscal and monetary policy, which has borrowed to spend trillions and allowed the Fed to run the printing presses around the clock to flood the economy with money that dilutes the value of our current money supply. Our wasteful spending (to the extent that appropriated money has already been spent) has had dubious impact on economic growth; countries that didn't spend the way we have, have already had quarters of economic growth, which suggests that the economic cycle moved along on its own and the recession was a pretty typical one to two year downturn that is moving cyclically on its own.

Our politicians and the Fed, which has been more politicized than ever under Ben Bernanke, are so reactive. They weren't worrying about inflation, even as they did things that they know will spur massive inflation. They were reacting to the current environment which was deflationary. It's how we do everything. We torch the forest to kill an insect that is right in front of our nose, because we ignore what we know: that fire is hard to control. The question is, did these guys precipitate a forest fire? The gold market is acting like they did.

If we get nailed by runaway inflation over the next few years, no one can say we shouldn't have seen it coming. Plenty of people were sounding the warning alarms. If that is the case, it will be interesting to watch what happens to the prices of gold and silver. The gold bugs might finally see the day of riches they always sit waiting for. Gold could get into the thousands of dollars per ounce if inflation gets out of hand.

Anyhow, a lot of that is obviously just my opinion. ... I know I politicized the post a bit, but regardless of what you think about our fiscal and monetary policy, the prices of precious metals seem ready to go for a ride and the word "inflation" is starting to reenter people's vocabularies.

 

Interests me. If it doesn't interest anyone else enough to discuss, no worries.

Chances are we will be talking about inflation on this board at some point, especially if we see some variation of stagflation or very moderate economic growth combined with inflation. Let's say the economy recovers, but not enough to make back what it has lost. If at the same time everything is going up in price, we may not be in a recession, but people are going to be marching with their pitchforks. Unemployment could be hovering around 7 or 8 percent and prices of everything could be going up. It won't make for a happy population if that does happen.

 

BT, What Alan Greenspan did throughout the 90s, and Ben Bernanke has continued, largely precipitated what we have been dealing with in the financial meltdown. We got a decade of false prosperity (or at least prosperity well beyond what we were looking at). It came at a cost.

Inflation fears doesn't equal inflation. No arguments. We are not seeing inflation. ... yet. But out-of-control spending and unprecedented monetary policy that puts $2 trillion on the Fed's balance sheet is a formula for inflation, if everything else is equal. I'll be interested to see how it DOESN'T lead to an inflation problem.

 

No more than you tout the MLBPA and everyone who has ever worn a baseball uniform for a living.

I'm not touting anything, cranberry. Just trying to have a conversation. Your participation is noted.

 

Maybe this helps. ... if you care.

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/6162659/Gold-price-what-next.html