Until August 15, 1971, wealth was tallied in units of a real and natural thing – gold. It measured out the world’s other real things – its resources and its output. Its main advantage was that it couldn’t be diddled. That turned the authorities against it; they couldn’t make more of it.
[Read more...]Deflation and the Gold Price Trajectory
July 18, 2011 By Leave a Comment
What happened last week?
The Great Correction gave notice: it’s not going away.
On Friday, the Dow rose 42 points. The gold price advanced towards $1,600. Oil seems to be headed for $100.
[Read more...]Helicopter Money
June 30, 2011 By Leave a Comment
A great deal can be learned about the government’s response to this crisis, as well as the mistaken policies that necessitated it, by analyzing a speech delivered by Ben Bernanke on 21 November 2002. At that time, Bernanke was a Governor of the Federal Reserve. The speech, to the National Economists Club, was titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here”.
[Read more...]Gold and Deflation
August 17, 2010 By Leave a Comment
I have been speaking and writing about gold's appeal in a deflationary environment – this is a concept that opposes the conventional opinion that the gold price will not rise without inflation.
Those who cling to that singular gold-inflation relationship have not examined the history of gold as money. Whenever there is substantial inflation or deflation, governments tend to either be too slow to react or they overreact with policies, and this is typically good for gold.
[Read more...]Even Low-Cost Leader Wal-Mart Shows Signs of Inflation
August 16, 2010 By Leave a Comment
Good old “Save money. Live better.” Wal-Mart may be choosing instead to surreptitiously raise prices, according to a JPMorgan Chase study. The company, well known by consumers for constantly lowering prices when possible, now appears to be moving in a different direction. In at least one Virginia store, Wal-Mart has recently increased its prices about six percent on average over a six-week period.
[Read more...]Debunking Deflation
August 12, 2010 By Leave a Comment
Now that almost every Wall Street economist is looking for the arrival of a Great Deflation, we think investors should begin looking the other way. Keep an eye out for inflation, we say.
You will recall that during the bottom of the previous bear-market, most of the pundits were shunning ‘risky assets' (stocks and commodities) and they were advocating a heavy exposure to cash and fixed income assets. Back then, the vast majority of strategists and their devotees were erroneously fretting about deflation. According to these folks, deflation was a done deal due to the following reasons:
[Read more...]A World of Phony Prices and Twisted Numbers
August 4, 2010 By Leave a Comment
Remember our discussion of prices yesterday? Here at The Daily Reckoning, we have nothing against higher prices…and nothing against lower prices. It's dishonest, misleading, and treacherously false prices that we don't like. They send the wrong information. They may tell us that an item is plentiful, for example, when it is actually in short supply. They may cause us to invest our money in the belief that profit margins are increasing when they are actually shrinking. They may also induce us to expand production, when the world already has far too much of what we have to offer.
[Read more...]Deflation: The Blood on Bernanke’s Hands
August 4, 2010 By Leave a Comment
We left off yesterday’s issue “When Good Falling Prices Go Bad” wondering what stock market investors were thinking. They bought stocks heavily on Monday. Then, yesterday, they sold them a bit – the Dow fell 38 points.
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Passing the Gold Bar
First, a look at the markets. They’re becoming exciting. Yesterday, for example, stocks reversed some of the losses from Friday. The Dow ended up 68 points, keeping the index above 11,000.
Going the other way, gold lost $49.
What to make of it?
In our guess…both stocks and gold SHOULD be going down. That doesn’t mean they will go down, of course. But at least it gives us a point of reference.
[Read more...]