Easier said than done, though, wouldn't you agree? And yes, you do have to hold your nose at these prices. Only scary thing is that with plat at 2100+, gold is looking cheap!
What is the reason why extreme negative real interest rates as u put it looking ahead will not bring down inflation I would have thought when cash and bonds yields nothing investing to increase capacity would make sense. Sure there might not be demand for anything but oil/gold etc but then inflation will not be a problem.
Crude up $4 today, within a hair's breath of $100. Thank you Ben! Let's continue to pump out those dollars and tell everybody that inflation is contained and at a low 2%! We believe. :eek:
Historically that didn't work out too well - production expanded to meet demand but there was little interest in quality, etc... marginal business activities (mines, factories) were made possible/profitable due to the inflationary effects but once things stablized/reverted to the mean they were useless with much being written off. c.f. The great disorder http://www.amazon.com/Great-Disorde...bs_sr_1?ie=UTF8&s=books&qid=1203452588&sr=8-1
The powers that be have a vested interest in keeping inflation numbers low. The labour market keys off government inflation stats as a benchmark for wage hikes. When wages meet inflation, swindling the nations saved income to the tune of 2-4% per year becomes impossible for Government. We're talking about an absolutely vast, off-budget "revenue" stream that simply dries up. Second, when price inflation is validated by wage inflation you get the beginnings of 1970's-style stagflation. This is a harbringer of recession - very bad for politicians and the health of the economy in general. The path of least resistence is folowed - proclaim things are great, rob the taxpayers and economy stays in the black (in theory).
Mike Shedlock offers a very insightful perspective about inflation in this interview: http://www.doctorhousingbubble.com/ "Mish" as he's called is well-respected for his analysis of macroeconomic trends. RT
Now that would be an economic disaster and a clear step towards a hyperinflationary crisis... from price controls to total loss of faith in currency... there's only a short distance.
Of course you are talking about monetary inflation while the others are referring to price inflation. It's unfortunate that the same word is used for two different things.
Gene Epsteins article in barrons was a nice little recap of money, credit and the gold standard. Greenspan was once a gold bug. When governments can issue unlimited money and credit, and deficit spend at the expense of future growth there is a real problem. This whole thing has to keep inflating just so it doesnt blow itself up