I don’t know about you, but I’m fed up with being a victim of Wall Street speculators who are driving food and fuel prices up through the roof. The recent plunge in commodities prices confirms what everyone knew all the time — inflation is being driven by commodities speculators who are profiting from everyone else’s collective misery. [read full story]
Today I heard it again on the car radio — an advertisement claiming that since gold has topped $1,500 an ounce it’s a “must buy” for every responsible saver.
If only it were true that I could protect my family from economic Armageddon by buying gold.
Unfortunately, the hard facts are that increasingly since 2000 gold has been the opposite of an inflation hedge. Even worse, when interest rates rise in response to inflation, gold will fall in value, and maybe by a lot.
The historical relationship of gold to inflation, i.e., that it is a hedge, is no longer true. Gold has been “financialized” by Wall Street and its price is being driven by institutional speculators that buy it by borrowing money at near 0% interest. As long as interest rates remain low, the cost of betting on gold is very low and money flows into the gold market.
As gold prices soar individual investors need to beware. One day interest rates will start to rise and gold prices will plummet. Innocent victims that buy gold because of a mass market sales pitch will be sorry.
My strong advice to readers is don’t be a gold bug. It’s only a matter of time before the Fed exterminates you. [read full story]
Despite the quick run up in gasoline prices, the U.S. economy isn’t about to be eaten by the inflation monster. While it is a good bet that sometime in the next few years the Fed will have to deal with rising inflation, now isn’t the time to change monetary policy in an effort to slay […] [read full story]
Conventional wisdom is that the Fed’s printing presses are running overtime and the economy is awash with liquidity. Just yesterday the National Association for Business Economics reported that almost half the economists they surveyed believed that Federal Reserve Policy is inflationary. Too bad the NABE surveyed economists and conventional wisdom are wrong. Economists, pundits and journalists […] [read full story]
Conventional wisdom suggests that a very aggressive monetary policy will cause rapid inflation. However, in this month’s Federal Reserve Bank of St. Louis Review, William Gavin says that the conventional wisdom maybe wrong and that inflation isn’t predestined or even a likely result of current monetary policy. Gavin believes that if the economy recovers before […] [read full story]
There are opaque and early signs that the U.S. economy has started the beginning of a bottoming process. Just like a diving submarine needs to stop its downward motion and reach its lowest depth before it can resurface, the economy needs to go through the steps of slowing its decline and stabilizing before it can […] [read full story]
Last weekend I went fishing in Tokyo harbor. The below picture is my friend Masura Ono with a really big fish that he caught on his boat. Ono-san is a famous lawyer in Tokyo. He is a senior partner at the largest law firm in Japan as well as a law professor at the University […] [read full story]
Set forth below are my predictions for 2009. Let’s hope that at least some of them come true. Early in 2009, the banks start lending again In January, the banks will realize that they cannot avoid lending forever. The Federal Reserve will financially punish any bank that refuses to lend by manipulating interest rates so that banks […] [read full story]
We’ve entered the twilight zone. This week’s money supply and economic data is surreal. Money supply is growing at an unbelievable pace. As measured by seasonally adjusted M1 and M2, the Fed announced that money supply set new all time records. The quick rate of growth for money supply is actually accelerating. Over the last […] [read full story]
Today’s Wall Street Journal Heard On The Street column said that the “air maybe going out of the deflation risk”. The article states “…history shows how quickly deflation can give way to inflation. Paul Kasriel, director of economic research at Northern Trust notes that in 1933, the U.S. suffered severe deflation, yet the following year […] [read full story]