Let Them Eat Low Interest Rates -- Economic Commentary by the Mogambo Guru

The Daily Reckoning ^ | 11/12/03 | Richard Daughty

[arete]

Martin Weiss expresses it as, "Right now, American consumers are more deeply in debt than any other population in the history of mankind. But instead of helping people find a way to dig themselves out of debt, our government is perpetually looking for new ways to get them to borrow, spend and speculate more."

Now, the British and the Australians have lower price inflation than we do, and they are raising interest rates to keep it from getting out of hand. But here in the USA, we laugh at them - hahaha! - and say "Hey, morons! Just because prices are going up doesn't mean you are having inflation! Don't you have any government people to explain it to you?"

"In summary, debt remains one of biggest impediments to a sustained economic recovery and continuation of this bear market rally. It is one reason why we still remain bearish. All of the malinvestments of the previous boom have yet to be liquidated. The Fed has merely postponed the day of reckoning not eliminated it."

So how to incorporate this inflation into official estimates of aggregate price inflation? Well, the government's answer is to, of course, try to ignore the whole thing and just announce any number that tickles their fancy, as long as it is low and wonderful.

I'm not saying it is time to run for the hills, but maybe moseying over in that direction would be a really good idea.

Buy commodities. We are about to see inflation like you can't even imagine.

Richard W.

[arete]

FYI

Comments and opinions welcome.

Richard W.

[Steven W.]

Buy commodities. We are about to see inflation like you can't even imagine.

This is why you can never take the ever-more-foolish bears seriously. seriously! never! ever! Remember, it was just months ago and last year that your cohorts were preaching the imminent demise of the US and its economy, currency, etc., due to deflation. now it's inflation. How about something in the middle (ala small inflation) over the long term, as I'd always predicted.

[Asclepius]

He also thinks that the Canadian dollar is a good buy, since the Canadian economy has a such a strong commodity and natural resources component.

Like most of the third world, yes.

(What horrid analysis!)

[lelio]

"At the time the Fed was created in 1913, gold was trading for US$20.35/ounce. Now it's pushing US$400/ounce, an increase of 1,900% that is roughly equivalent to the 1,500% increase in consumer prices since fiat money became U.S. legal tender."

Is there a place that compares the price of gold to other items, such as a house, car, college tutition, etc? Granted those prices vary a lot (houses can go for $100k -> $500k in the same neighborhood, private vs public education, etc).

[arete]

The minute that sheep like yourself start agreeing with me, is when I'll know I'm on the wrong side of the trade.

Richard W.

[arete]

Canadian dollar is a good buy

It certainly has proven very profitable for me so far.

Richard W.

[arete]

Is there a place that compares the price of gold to other items, such as a house

There probably is but I don't know where off hand.

Richard W.

[sergeantdave]

ala small inflation

---

SMALL INFLATION PRESENTS....

My favorite whole grain bread from the local baker was $1.09 three years ago. Today it's $2.29. That's near 100% inflation in three years.

I know. I know. Rolls Royces are cheaper and computers are a dime a dozen. I oughta buy one of each twice a week to balance out my inflating budget. Was thinking about digging a moat with gators to keep out the taxman who insists on mopping up my inflated fiat with his tax plan.

Guess I'll go eat cake. (Grumble....)

[meenie]

Sioux nation. An ounce of gold or the equivalent in dollars will buy a teepee.

[groanup]

"Buy commodities. We are about to see inflation like you can't even imagine"

I already own a pantry full of them. (Actually I'm out of coffee. Thanks.) I'd rather short bonds.

[groanup]

"Is there a place that compares the price of gold to other items, such as a house,"

I don't where such a comparison exists (it sure does somewhere) but I can say for certain that in the last 20 years gold has been the worst market for making money while tens of millions of homeowners have profited handsomely.

[groanup]

"The minute that sheep like yourself start agreeing with me, is when I'll know I'm on the wrong side of the trade"

You know Richard we all appreciate your posts. I can't help but wonder when you add your little snippets of advice while looking down your nose at the ovine masses: If you know what the market is going to do why do you share that information? Wouldn't it be more profitable to act on it before the word gets out?

[Starwind]

- Martin Weiss of the Safe Money Report figures that the $500 budget deficit, the borrowings from the Social Security Trust Fund, the war in Iraq, planned tax cuts, prescription drug coverage and the money needed to bail out the Pension Benefit Guaranty Corporation add up to a total deficit for 2004 of, and I hope you are sitting down for this, over one trillion dollars. That's just the deficits. Add in the regular budget of two trillion bucks, and suddenly we are looking at government spending of about 30% of GDP!

Golly.

[sarcasm]

Stagflation ahead?

[arete]

I have repeatedly posted my positions and my ideas on bubble economics only to be subjected to the some fairly adolescent comments from posters such as Steven W. who really want to believe in a free lunch and big government salvation. Most of the time I ignore them, tonight I didn't.

Richard W.

[AdamSelene235]

Hiya Steve,

Missed you last night on MarketWrap up.

Here's a excerpt.

Yet in the last three years, the price of the yellow metal has risen 54% from its nadir of $255.55 on April 2, 2001 to today’s 7-year high of $394.45. The movement in the price of the metal is nothing compared to what has happened to the price of gold shares. The Amex Gold Bugs Index (HUI) has soared by an incredible 440% since January of 2001. The index is up 82% over the last 52 weeks and has surpassed even the gains in the NASDAQ this year. The HUI is up 53% this year compared to 47% for the NASDAQ.

[arete]

Stagflation ahead?

How about stagflation now.

Richard W.

[sarcasm]

You ain't seen nothing yet.

[Starwind]

This is why you can never take the ever-more-foolish bears seriously. seriously! never! ever! ... How about something in the middle (ala small inflation) over the long term, as I'd always predicted.

What makes you think anyone takes you seriously? Ever?