Click to enlarge.
Deflation flattened the "sure thing" blue trend line and added a great deal of uncertainty as seen in the red trend line.
Although we are back in the blue zone right now, there's no telling how long we will stay here.
Should stagflation appear, I would expect to see the trend line steepen and create additional uncertainty. Although I am braced for this outcome by owning TIPS, I actually lean more towards a deflationary relapse. QE2 is wrapping up soon and there's little talk of additional stimulus. I'm not sure the patient can do well without life support.
Readers know that I am no fan of gold at these levels (compared to the price of toilet paper anyway). That said, if gold feeds on uncertainty then there may be much more yet to come.
November 23, 2010
George Soros’ and John Paulson’s Biggest Holding Is GOLD
“It’s all a question of where are you in that bubble,” Soros, 80, said in a speech at a meeting organized by the Canadian International Council in Toronto on Nov. 15. “The current conditions of actual deflationary pressures and fear of inflation is pretty ideal for gold to rise.”
“The big negative is that too many people know this and a lot of hedge funds are very heavily exposed,” Soros said. “Gold has shown tendencies to go parabolic and usually bubbles tend to end in that parabolic rise before the collapse.”
March 4, 2011
Latest surge in oil prices sends stocks lower
NEW YORK (AP) -- Stocks fell Friday as worries about another jump in oil prices overshadow a solid report on the U.S. job market.
It is amazing what $117 billion per month can do to oil prices, employment, and the stock market.
Source Data:
FRB: Selected Interest Rates
QE2 is wrapping up soon and there's little talk of additional stimulus. I'm not sure the patient can do well without life support.
ReplyDeleteStag,
That's how I see it. We'll have more stimulus and QE once we start staring into the deflationary abyss again - within months of taking the patient off life support.
The stinking pile of ponzi debt is going to take many years to work through the system. Uncertainty lies ahead. I'm certain of it.....I think.
Gold is insurance at best. Imo, it's an over-priced insurance at this point. Way over-priced.
Holy cow! My work verification was "untruste".
ReplyDeleteUntruste indeed!
I like George Soros as an investor. He is an interesting guy, and I agree with him that we have not hit the parabolic stage of gold prices. The crisis has not peaked, and the only signs I've seen that anyone is working on a fix to our unbalanced and shaky system is the IMF with their plan to replace the dollar with the SDR.
ReplyDeleteSome sources I read claim the worst of the crisis is still about 2 years away when the next full recession hits and we have not recovered from this one. Look for 20% of GDP budget deficits, 4+ trillion a year. Wheeee!
Until then, I've got a handful of coins and a greedy gleam in my eye. In a movie, this is the part where something bad usually happens to the greedy person. :)
mab,
ReplyDeleteMy work verification was "untruste".
Freudian slip? I think there are going to be quite a few "work verifications" if we're right about the future! Sigh.
Mr Slippery,
ReplyDeleteI've got no problem with people making fortunes off a potential gold bubble. Just don't drag me into hyperinflation! ;)