zalo

How Does $9000 Gold Sound?

$9,000 per ounce gold sounds really dumb to me. Gold, as paper money, does not have any usage value, apart for some medical/electrical/con... usage.
On behalf of the dollar, it still is the currency of the most powerful country of the world. A currency value is based on the type of assets you can buy with it, and everybody likes the USD because you can go with USD to the US and buy pretty much everything (from shoes, to cars, to top world class education). Can you do that with the ruble, the yuan? No, you can´t. So, anything that debases the USD vs other currencies (without huge inflation in the US, which seems, for now, its not going to happen) even against gold, i would be a USD buyer for sure.

Deflation Risk Dipping As Stagflation Risk Rises

I think that inflation fears, at least for now, are overstated. First of all, what we are seeing in the treasuries market is a correction from an irrationally overbought condition produced by fear. That long term treasury rates go up to, say 4 or 4.5% is still very accomodative for very low inflation levels. If inflation expectations are extracted from the difference between nominal and real rates, expectations are still at extremely very low levels. Second of all, spare capacity is building up fast both in labour and capital. As unemployment rises it is hard to think that hardly there will be salary pressures. Companies are closing operations leaving plenty of spare capacity out there. So lets remember economics 1 from university. Inflation can only be produced if demand reaches the steepest part of the supply curve. At this moment demand is in fact going the other way round. So, stimulating the economy through fiscal and monetaty measures in this situation can hardly be inflationary. Certainly it can be if the government overshoots but it can hardly be said that with an expected negative global growth for 2009, that overshooting can happen at least this year.