Moral Hazards Amok

The Ultimate Commodities ETF Guide

Pretty much everything in this list looks like it’s at the top of a short term trading channel except for --- WOW look at that! UNG!

Pull it up on a weekly chart and notice the extremely high trading volume of this last week’s breakout. This train is just now leaving the station and still has much farther to run. Good luck all.

Decoupling Of Physical Gold And Paper Gold Prices

Two points:

1) I remember going through all this before in the 80s. Fiat paper was dead, only hard metals had real value and would be our future currency, yadda, yadda, yadda…

Back then it was all just hysteria from retail investors. Nothing is different this time.

2) As the great credit supercycle winds down and society is forced to de-lever , almost everything is going to contract in value; real estate, consumer goods, etc. Why would gold and silver be any different, especially now that central bankers have taken a stand and have started raising rates?

The Real Story of Precious Metals' Returns

Let’s see, in 1868 a silver dollar would buy you a bath, a nice steak dinner, and a night’s stay in a luxury hotel.

Today an ounce of silver won’t even buy you much of a meal. Sounds like a lousy inflation hedge to me.

Is Gold a Good Investment During the Credit Crunch?

Inflation! You hit the nail on the head.

Gold will continue to be a good investment as long as the central bank keeps inflating the M3 money supply at over 16%, making gold an attractive safe heaven from the Fed’s destruction of our fiat money supply. Inflating the money supply above that of GDP is the ONLY real cause of inflation, btw.

Ok, how long will this continue you may ask?

A long time. The central bank, which is made up of human beings acting in their own interests, will inflate the money supply (M3) as long as they can get away with it, probably for at least 2 or 3 more years. This inflation pushes the credit crunch and employment problems out to the next administration and also greatly benefits the shadow banking system, which was the real objective of inflation in the first place.

Two or Three years, are you kidding? But I thought that inflation was caused by unanchored expectations, and increasing wage demands, (you say)?

No, that’s what Uncle Ben and the old Keynesian and Phillip’s curve crowd wants you to believe but in fact those people were thoroughly discredited back in the 70s. Unfortunately, we have that same crowd running the money show now making the same terribly policy blunders today that were made in the mid-70s with the same results, and just like the 70s, inflation AND unemployment will continue and get much worse. Obama’s team also holds the same discredited loose money views, so don’t expect any changes there if he wins.

Wait just a second! Won’t demand destruction, deleveraging, and a sour economy put the breaks on inflation???

No. That’s what the old Keynesian Phillip’s curve crowd told us back in the 70s too, and look how that turned out. Back then unemployment was over 10%, the economy had negative growth, and yet still inflation was at double digits and spiraling ever higher. High unemployment and a tanking economy did NOTHING to stop inflation because in the real world inflation is nothing less than a reckless increase in the money supply.

The day gold is no longer a good investment is the day when the Fed gets serous about controlling the money supply and I don’t see that happening anytime in the foreseeable future, because Greenspan, Ben, and the rest of the Phillip’s curve crown is still is in charge. Stay long on gold till otherwise.