$1000 Gold, $110 Oil, $4.00 gas, and low inflation. I promise.

Philadelphia Fed President Charles Plosser said he doesn’t think stagflation is a developing problem.  How does that work? 

The first question is, what is the situation on inflation.  To calculate core inflation, government does not include food and energy.  How does this work for your average American family?  How long can you go without driving or eating?  When we look at true inflation, at what prices have been actually doing at the grocery store and gas station, we find a much higher inflation.

One question is, how high is inflation.  The inflation of the Euro is around 2.5% per year.  In 2002 the it took $.8578 to buy a euro.  Now it takes $1.5904.  This means that the value of the dollar relative to the euro has dropped 10.8% per year, on average, over the past 6 years.  Combine these two facts and you end up with inflation of 13.3% per year.  I am getting slaughtered right now in the market.  The commodities are showing a lot of weakness based on the fact that the market is going to hell in a handbasket.  I still like real resources.   The full faith and credit of the US government does not do it for me.  The credit score of the government is dropping, and I hate to be holding too many of their checks.  Some one (Hulia) recently asked me what I think of keeping cash.  I still think you ought to set some aside to cover basic living expenses for 6 months, but I wouldn’t do too much more than that.  Holding an asset that seems to be depreciating at over 10% a year seems like a bad plan.  Gold and silver never really grow, but at least they have some intrinsic value. 

 Bear and Stearns is a pretty scary portrayal of what is going on in the market place.  People have made bad choices.  We think that the market owes us 15% a year.  Now we are seeing that if we demand those returns, the market gives them to us, but they turn out to be an illusion.  I had a rough day today finacially, but it does not even compare to the poor guy who lost a billion

Anyway, another amazing thing that happened is that I found myself agreeing with Harry Reid.   These big companies are in an interesting position.  If they crash, they will cause massive financial disruptions.  They then take aggressive risks, and if it pans out, they pocket the money.  If it doesn’t pan out, they tell the government that they have to survive.  A crash would be bad for the economy.  The taxpayer ends up insuring the big businesses.  Democrats believe in welfare for the poor (the projects worked out really well), Republicans believe in welfare for corporations (we sure learned our lessons from the savings and loan crisis). 

This money the Fed is pumping into the market is inflation happening before your eyes.   It is scary when we use fake economics to prop up the system.  Manufacturing continues to decline.  We can not consume more than we produce long term.  We have tried.


3 Responses to “$1000 Gold, $110 Oil, $4.00 gas, and low inflation. I promise.”

  1. 1 wendy April 6, 2008 at 9:57 pm

    http://www.libertydollar.org Legal tender in America that is backed by gold and silver.

  2. 2 Sweepstakes June 19, 2008 at 10:53 am

    Somehow i missed the point. Probably lost in translation 🙂 Anyway … nice blog to visit.

    cheers, Sweepstakes!

  3. 3 affiliate marketing November 24, 2014 at 11:18 am

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