Wednesday, March 30, 2011
Anybody out there worried about inflation?
Timely post, TH. As I write this I am cutting the tape on my latest shipment of 500 oz. My PM holdings are up about 80% in the past 6 months, measured in fiat dollars of course.
The world changed in 2008 when governments across the developed world abandoned free market principles and assumed the liabilities of failed financial institutions. Central banks are now faced with the choice of print or die, and they will print. Those who fail to understand this simple fact will find themselves facing an increasingly impoverished future.
I look for a pullback in silver and gold in May/June as the Fed does a head fake about terminating QE. The Fed can maintain an implicit program of QE for 6-12 months using the flows generated by the assets on their current balance sheet. A formal QE3 program will be implemented by Spring 2012. Failure to do so will cause the a deflationary depression that will make '29 look like a walk in the park and will also bankrupt the U.S. government.
Did you see Instapundit's link to Walmart CEO Simon saying that the company is already seeing "significant inflation" in Walmart's own purchasing and the consumer will be shocked when it starts coming through to retail prices.
But we have bigger problems. While housing values are down significantly, and has another 20% drop to go, crushing burdens of mortgage debt still is holding the consumer back. Worse, the only thing allowing the stock market to go up is QE2, meaning the Fed has consciously created a stock market bubble, and has addicted financial institutions are to zero cost of funds. As the existing inflation begins to hit consumers harder asset classes that traditionally do well in inflation, primarily housing, aren't going to and consumers will feel the full furious hits to their already stretched thin wallets. In this scenario, and with a Presidential election coming up, QE3 is inevitable, as banks again begin to teeter, and the negative feedback loop will then be complete.
We have time to act, if we act now. The President of the United States needs to be made to understand what is happening, or we are going to have "Obama-ville's" in the streets and a tremendous upsurge in worldwide poverty. World War 2 was a consequence of the last such event.
"The President of the United States needs to be made to understand what is happening"
You can't tell this shithead anything. When first in office he used the crisis to advance his agenda.
We're an overloaded plane trying to lift off the runway. If we keep gunning the engine (e.g., QE3) we'll lift a bit more and then crash. If we throttle back (e.g., spending cuts) we'll still crash.
"Trillion dollar plus" structural deficits are a very real problem. Most of America doesn't yet understand the implications. We'll need a crisis first. We're getting close to one. I'd bet it hits by early 2012 with the start of a double dip recession, but I don't have a crystal ball.
ANON sees this a repeat of the 1930s, I'm hoping it's more like the 1970s. Unemployment and Residential Mortgages are two big problems that haven't been addressed, just delayed. When they hit, ANON may prove more right than I.
The left are overplaying their hand (witness Wisconsin and Schumer). They may get away with it for awhile, but expect a real harsh backlash after the crisis hits.
We need a true populist as the Republican nominee. Usually we want "cool" in a candidate. This time we're gonna want "hot." Pitchforks optional.
Oooooh! Let's make the POTUS act differently by making him understand......Ignorant fools! Barack Hussein is deliberatley carrying out his policies with the aim of destroying this country! We can no longer afford to simply "disagree" with his policies, with a "hail fellow well-met" view that poses BHO just thinks we can all get to the same point by only different means.
No this Administration is insidiously working to purposely undermine this economy and this nation! To think otherwise is merely self-denial.
The time when "lock and load" is the only policy that will counter this destructiveness, is rapidly appraoching! Soon the most precious metals will be brass and lead.