As expected, the US government is throwing money at Katrina, while at the same time reports of rampant fraud of 911 funds is coming out. Can there be any doubt, that the Fed Reserve/US Government will attempt to inflate their way out of this? That more debt will be issued, than could ever possibly be paid back? If you were a foreign bond buyer, would you want to dump more money in a depreciating currency for a low interest rate? And if people demand a higher rate to account for the currency loss, what does that do to existing bonds? I think precious metals are going to get very interesting here. $7 an ounce of silver. I have a silver eagle sitting on my desk. It's very pretty, and the fed cant turn it into crap. Nobody can default on it. Adjusted for inflation, it's about the cheapest it's ever been
i agree that gold and silver have a nice ride ahead of them. the reasons are really too many to enumerate. however, i would not say that just because the gov is spending more on katrina, that we'll necessarily see inflation. it's my understanding that it really the fed that will determine whether they'll accommodate spending. since reagan's first term, the gov's been spending more and more an inflation has been on a downward trajectory. the link between gov spending and inflation isn't that strong. it's more an issue of negative real interest rates. if the the fed keeps interest rates well below where they naturally should be, then we are more likely to see inflation than if the gov spends. plus 200 B in gov spending on katrina really isn't that much. it's under $1000 for every US citizen. i still think the future of gold is strong though.
Whether we see inflation at the consumer level (ie CPI) or not doesn't necessarily mean it doesn't exist. At first glance, it would seem that costs for companies are escalating for everything they do. From energy, plastics, to copper, prices are higher. The only question is whether corporations push through these costs to the consumer or do they "eat" these additional costs to the detriment of their bottom line. Either way, it's a losing situation for the equity markets. Corporate profits will stagnate or decline if they "eat" the inflation, or if they do push it through, we'll have an inflation problem on our hands. Whether the Fed chooses to address the inflation or not, it doesn't really matter, because the markets will. Gold does look good here.
interesting ... since "katrina" the price of gold amd silver have been really strong looks like the gold / USD correlation is not so strong right now as a few weeks ago
well, one week later, things are looking better for gold - silver i heard bush last night 'i will buy our way out of this' and dollar holders ran for the doors
the literal translation is... "there is no forrest too big to cut down the trees to make the paper to print the money to bail ourselves out of anything...." "and what's all this whining about a tank of gas costing $85?"
I have been reading that after the FED raises another 1/4 point ... gold might selloff alittle what if the FED stands pat ? :eek:
saw this on the wires ... could this be one less -run for the gold - geopolitical type of event ? -north korea pledged to drop its nuclear weapons development and rejoin international arms treaties in a unanimous agreement Monday at six-party arms talks, the first ever after more than two years of negotiations.-