Posted on 10/23/2009 3:57:53 PM PDT by h20skier66
Most of us are gathered at the station, watching for the Inflation Express to come rumbling in. But we've been waiting for a while now. Just when should we expect the big locomotive to arrive and start pushing the prices of most things uphill?
We'd all like to know the exact date, of course, but no one can know for sure. Not even a careful reading of the Mayan calendar will help. What we can do is estimate a time range for price inflation to show up, and that alone should have some important implications for investment decisions.
Why It's Expected
The reason for expecting price inflation is the recent, rapid growth in the money supply and the deficit-driven likelihood that more such growth is coming.
As of July, the M1 money supply (currency held by the public plus checking deposits) had grown 17.5% in a year's time. That's not just unusually rapid, it's extraordinarily rapid. Since 1959, M1 has grown more rapidly in only one other 12-month period - and that was the one ending last June, when the M1 money supply jumped 18.4%. Even in the inflation-plagued 1970s, growth in M1 never exceeded 10% in any 12 months.
Dropping large chunks of newly created money into the economy leads to price inflation, because the recipients are likely to find themselves overprovisioned with cash. As they try to unload the excess, they bid up the prices of the things they buy, whether it be stocks, shoes, gasoline, silver coins, or granola. The sellers of those things then find themselves cash rich and start doing some buying of their own, and so the wave of excess money and the bidding it inspires propagate through the economy.
(Excerpt) Read more at commoditynewscenter.com ...
I thought Friday was “deflation will get us” day of the week.
It’s not a matter of if the crash is coming. Extreme deficit spending is simply unsustainable.
I almost feel bad for all of the people dumping money into the stock market right now; it’s going to be hit just as bad as everything else when the bubble pops.
The stock market is a great place to make money in the short term. I’ve made a considerable amount of money. It’s most certainly not going to last, IMO.
The problem(s): There are only two real uses for gold in the world, i.e. jewelry and electrical connectors, and the amount of the stuff stashed at Ft. Knox has to be billions of times what the human race will ever need for jewelry and electrical connectors.
Moreover there is no shortage of the stuff outside of Ft. Knox. Every ounce of the stuff which has ever been mined since Adam and Eve and Alley Oop is still around, minus wear and tear.
In theory there actually is a third use for gold, i.e. it would be the most perfect metal possible for waterfowl shot, half again denser than lead, soft, and totally inert; don't hold your breath waiting to read about anybody doing that with it.
In other words, the value of gold is 100% related to psychology and psychiatry, and zero percent related to physics or economics. That's always kept me from wanting to own the stuff.
Well, that would be about $5,000 per round or more!
I prefer depleted uranium; much cheaper. And it's well, sorta inert...
The problem with this theory is that while M1 is massive right now, most is in the hands of the financial institutions.
These financial institutions are not lending. That is why we do not see inflation. The money is not getting out to the spenders.
If the money gets out into the population, we should see a massive economic upturn while inflation ratchets up.
That is when the genie is out of the bottle....when the money gets out.
This is what Bernanke and Geitner are talking about when they say the timing is critical. If they stop too soon, the financial institutions will still have oodles of bad debt on their books and the economy will still be crap.
If they stop too late, the inflation train will have left the station.
As I’ve read it there are two kinds of DU, one more inert than the other and naturally enough, the inert kind is more expensive and doesn’t get used enough...
Cheers!
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