Wednesday, September 22, 2010


Yes, we are lurching from the weird to the surreal...

The US$ is back in the mud, the rest of the economy is deflating (and even the Fed is recognizing that), and Gold & Silver have gone vertical. Or have they? The Gold/Dow ratio hasn't gone anywhere... In fact, as the Mad Scientist points out, there has been only one market of late - everything is going up at roughly the same rate of change - it didn't matter what you went long... they all went up.

So far, Marc Farber is being born out... it is best not to deny what your own eyes are seeing. Could it be that we are witnessing the world move from the US$ to Gold as the de facto reserve currency? Time, and the price of Gold, will tell... Or will it? If that is true... WTF is up with the Bond Market?

Here's what I think... I think that the various central bank interventions and stimuli have caused so many distortions that this might not even be clear in hind sight.


bureaucrat said...

Gold goes up when people are unsure about what is going on in the financial system. We would normally also blame inflation "ticking up." But since all that money that the Fed injected into the system is still sitting on account at the Fed for use by the banks at some future date (around $1 trillion), I dont think gold or silver have much to say about anything, except people are nervous.

We've been in this "Waiting for Godot" mode for over three years now, but "extend and pretend" is still the driving strategy. The supermarkets and gas stations are still fully stocked ...

Donal Lang said...

Gold is down against the Euro. So its just that the dollar is sliding = U.S. inflation. The extra trillion isn't going to help either.

The supermarkets and gas stations (and overstocking of cars and durables)....? that can show lack of demand, which is deflationary.

Maybe it all adds up to the Japanese Sickness; stagflation.