Which one do you subscribe to? I want to believe it will be an inflationary market, but fear it will be a deflationary one as there just won't be money around for the common person.
Thoughts?
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Gold buffs say inflation, buy gold. It looks to me
that we can have a very unhealthy mix of inflation
and deflation. in US with oil-induced price
increases and no industry growth to support the
job market they are seeing a real reduction
in standard of living.
Savers are getting slaughtered and borrowers are
being rewarded. Where is this taking us? They
gave away and are still giving away houses like
popcaorn in Las Vegas. Now many new housing
areas are littered with flat-tired cars and broken
tvs on the sidewalks. No one will spend their own
money to buy in those areas. This cheap money
policy will end up ruinong and diminishing value.
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Gold buffs say inflation, buy gold. It looks to me
that we can have a very unhealthy mix of inflation
and deflation. in US with oil-induced price
increases and no industry growth to support the
job market they are seeing a real reduction
in standard of living.
Savers are getting slaughtered and borrowers are
being rewarded. Where is this taking us? They
gave away and are still giving away houses like
popcaorn in Las Vegas. Now many new housing
areas are littered with flat-tired cars and broken
tvs on the sidewalks. No one will spend their own
money to buy in those areas. This cheap money
policy will end up ruinong and diminishing value.
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Gold bugs have been dead right for the past ten
years.
Inflation takes place when the economy is in the
toilet.
Deflation in a few asset bubbles does not mean
deflation overall.
The "debt" and "de-leveraging" concepts are
important to understand.
It can be dealt with by default or inflation,which is a
type of default.
If the voting public of the western world votes for a
dramatically lower standard of living,no health
care,no armed forces,no social security,no minimum
wage,no education,no welfare,etc,etc,etc....then count
me in on the deflation side.
I on the other hand like to stay in the real world,as a
collective we will keep walking up to the all you can
eat buffet,get fatter and fatter and more government
dependant until we explode like that fat guy on that
monty python sketch.
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beg to differ . . . deflation will trump inflation in this economic environment.
just wait until we witness a stock market sell-off and watch what happens to prices.
there is way too much debt and easy credit. Also gold and silver prices could also plunge. This is contrary to a lot of internet garbage that is floating out there.
Errol
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The problem with precious metals right
now is that it takes fear of inflation
to ignite buying demand. Gold and silver
are hedges against inflation, not
deflation.
Also, crude oil is at least $20 per
barrel overvalued, maybe more. When that
bubble bursts, corn and canola are in
big trouble. U.S. corn could be a sub
$5/bu market quickly. Canola may dive
into a $9 to $10/bu range which is still
considered high when looking at the big
picture.
Even bulletproof cattle could run for
cover triggering some nasty feeding
losses.
These markets can tumble hard and fast
if the right market ingredients converge
I've seen it many times in my career and
it will happen again. Commodities are
clearly at deflationary risk in my mind.
Errol
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Deflation?what do you call 100 per barrel at a
time the world economy is struggling to grow?
Reflation is the way the central banks are going
to fix the sovereign debt issues. Imagine when
the average retail investor decides he/she is no
longer happy with 1.9% yield on the ten year and
starts moving back into risk assets.
Imagine when a country like japan has to reflate
or default on it's massive debt.people think the
only way for a nation to de-lever is to stop
borrowing. However they forget that default,and
reflation is also a form of de-levering. And that is
a lot more palatable to the
electorate.(Greece,Argentina,Portugal)
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You can thank Iran for $100 per barrel
oil. There is about a $20 per barrel
geopolitical war tension premium built
into crude right now.
Also, if crude goes to $130 per barrel
like Goldman Sachs is preaching, can you
imagine the global recession /
depression it will create. Simply the
world cannot tolerate higher oil prices
without risk of more risk if financial
collapse.
Errol
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Europe is in a recession. North America is hardly
growing with 8.5% unemployment in the US and
China is slowing. My point is that despite all this
commodities remain relatively strong.you argue
we can't sustain $130 oil in an environment
where the US economy can hardly grow at 2%.
imagine if it were back to 3.5% then what?
remember there is a lot more paper flowing
around now than the last time we were at a
normal growth rate.
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Both sides are wrong on alternate days.
All that is happening are larger daily swings. Swings too high the message is "found an extra million ounces, lbs, kilos, tons, barrels, whatever is appropriate for the commodity. Swings too low the message is "weather related, natural disaster, political strife".
Nothing has change so long as you are getting your share of the injection of the new print. Sweat the details if you're not as you should be looking for a new occupation..
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Sure on a daily basis you can see the markets
move from risk off to risk on. Listen to newmonts
conference call and you will realize it costs a lot
more to find new gold than it used to. Same with
oil -70$ a barrel would make oilsand producers
pretty slow. Imagine if there was a massive out
flow from commodities ask yourself where that
money would go. I can't imagine people would
get to excited getting 50 basis points on ten year
treasuries.
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