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Don't Expect Hyperinflation for U.S. Economy

It's spelled "Fed", not "FED". It's not an acronym.

Clarification of Gold Comments in Seeking Alpha Live Discussion

Was that addressed to me? Assuming it was: then you did bother to understand my comment first, right? I bought my gold back at $300 and have been laughing at people's misunderstandings of gold, ever since. It has proved to be a most excellent form of savings (or store of value), its value immune from the corrosive effects of Fed-driven inflation.

Clarification of Gold Comments in Seeking Alpha Live Discussion

"So even if you know for sure that inflation is going up, it is not obvious that gold is a good investment." - Please note that gold is NEVER a good investment, rather, it is a form of savings. Gold is a store of value which, barring confiscation, is immune from monetary inflation. Gold *stocks* are the investment (and may or may not be a good one).

Clarification of Gold Comments in Seeking Alpha Live Discussion

How do you calculate the chart? It can't be right that in 1999, gold prices of $260 were only a tiny bit below gold's long-term value. Gold was very much under-priced in 1999-2001. I like your approach, but I would have to suspect that you are using some government price index that understates monetary inflation, and hence that the true long-term purchasing-power value of gold (in today's dollars) is significantly more than $400. I would believe a number more like $550-750.

I agree that gold at $900-plus is overpriced given present monetary levels. You can see that in the simple fact that jewelry consumers worldwide have largely dropped out of the gold market (finding gold too expensive) and the story these days is investment demand. At some point, the investment demand takes a breather and then gold has to correct. Of course, *if the Fed continues inflating*, gold at $900 will someday seem cheap, and that is what gold investors are pricing in now; their expectation that the Fed can't possibly withdraw its liquidity injections (because we cannot allow short term interest rates to rise) and in fact, will be politically driven to inject more and more liquidity.

Looking at the Deficit in Context

"Fully 37% of the deficit is due to macroeconomic effects, and an additional 33% of the deficit results directly from Mr Bush's policies."

Translation: Obama is 100% responsible for the deficit, being the present captain of the ship and with a very friendly Congress that would follow his lead if he wanted to change things, but he doesn't want to, so let's pretend he's somehow not responsible.

Facts:
- Obama's heavy-handed interference in the economy has worsened the macroeconomic situation above his own projections, as this chart shows: michaelscomments.files...
- Obama has significantly increased the federal spending and deficit levels, when he should have been reducing it - *ESPECIALLY* if it they were "caused by Bush policies" that were so bad. Didn't he promise to reverse all that?

Inflation: Demand Destruction and Wealth Erosion Trump Money Growth

Aargh. Apologies for the above ultra-late entry. I had a bunch of browser tabs open, got confused and mistakenly thought I was responding to a new article.

Inflation: Demand Destruction and Wealth Erosion Trump Money Growth

Mr. Brochstein, once again, you treat "inflation" as government-reported CPI inflation and ignore the Fed's unprecedented doubling of the monetary base. An Austrian (school) person would say that the inflation already happened, when the Fed doubled the monetary base, and working its way out into the broader financial and consumer markets takes time, and is only a matter of time.

We'll know who is right, in another year or so. Meanwhile, the "GDP is in decline" argument doesn't impress me, because it hasn't stopped commodity prices from going up and, you know, there is such a thing as "stagflation" (or even "inflationary depression").

Highlighting International Real Estate ETFs

THANKS for this article. I was wishing for an article on international real estate, just last weekend!

Can you say more about what IFGL and RWX invest in? (i.e., rough allocations by country/continent, and by type of property) Also, what do you think of FIREX?

Last weekend I started to search very very briefly on FIREX, RWX and DRW, and at least one of them had a surprisingly high U.S. allocation, which might defeat the goal of getting out of the dollar. (I wish I could have put some time into my search, but I was looking at a lot of things.)

Inflation: Demand Destruction and Wealth Erosion Trump Money Growth

> Gold: Gold price has not tracked inflation very well at all in course
> of history; else it would be $2500+ today.

That is indeed where it's headed, in fits and starts. Let's put it this way: If gold doesn't track monetary inflation over time (or over "the course of history" as you put it), then why is $870 gold normal today - even a bargain? Whereas, in 1980, $870 gold was an absurd price that could not be sustained (and was not). Come on. Gold *obviously* tracks monetary inflation "in course of history".

Stimulus Bill Signed; Now, Will It Work?

Oh, and this: "The idea that tax cuts are a better means to create jobs is odd too because giving a tax cut to an unemployed person (who isn’t earning any money) doesn’t really help him very much, and it certainly doesn’t get his job back." - Total straw man. The tax cuts being proposed (by smart people, anyway) are *corporate* tax cuts. America has unusually high corporate tax rates. Cutting those taxes would *save jobs now*, and that is what we need to do - just with offsetting spending cuts, not with Keynesian spending boosts, and not with bailouts of incompetent companies that deserve to fail.

Stimulus Bill Signed; Now, Will It Work?

Lots of fallacious reasoning in this article. Let's start with the chart. First, there is no reason to believe that the New Deal (or Roosevelt's spending) produced the GDP recovery. The economy was ready to recover on its own. And that's the problem with any government "stimulus": it interferes with market actions to rebalance and heal the economy, thus prolonging the crisis.

Which brings me to my second point: Unemployment stayed very high in the 1930s, even in the years when GDP (output) was recovering. To measure economic success or failure of the New Deal, you have to look at the target it was meant to address: unemployment. And by that measure, indeed it failed: employment did not recover well until WW2. There is a saying about the Great Depression, "It was great if you had a job." Real wages were maintained by various New Deal laws at unnaturally high levels, prolonging mass unemployment, even if GDP increased and was then pocketed by wage-earners.

Finally, my editorial points. The stimulus will work in the short run, while making problems worse in the long run. Keynesianism always does just that. I don't "hope" that it "succeeds" or fails; I simply expect what I just described. What I "hope" is that, when the 20% annual inflation rates hit us in 2011 or 2012, the American people will recognize the disease that caused it AND that caused the present crisis as well: numerous forms of massive government intervention in the economy. I hope the American people will, one day, be wise and smart enough about economics to reject Keynesianism once and for all.

The End of the Dollar and All Fiat Currencies

bearfund, thanks.

U.S. Household Sector Not as Bad Off as Commonly Believed

The broad, average P/E ratio hasn't corrected enough for us to enter a new long-term (secular) bull in stocks. It should fall below 10, as it did in 1920 and 1948 and 1982, the approximate starts of previous secular bulls. People should detest stocks and seriously think no one can possibly make money in them, at the start of a secular bull. We're not there yet.

Having said that: we could soon be in a short- to medium-term (cyclical) stock bull.

The End of the Dollar and All Fiat Currencies

P.S. Bonus question - is Alexander Hamilton good or bad in all this?
- He advocated gov't intervention in the economy.
- On the other hand, he did invent the U.S. Treasury bond (as a viable instrument) which has aided trade and capitalization in America and the world, for over 2 centuries.

The End of the Dollar and All Fiat Currencies

I have the same question as Marketer25. How does one hold gold?
- Apartments and houses and gardens can be broken into and searched, even scanned by fancy equipment.
- Safe deposit boxes can be attached by the government. Same with HSBC allocated accounts.
- Perth Mint certificates are kinda nifty, but a claim on another continent.
- Royal Canadian Mint is at least on this continent... but is an unallocated account, and who knows what Canada will do in all this?
- Turk's Goldmoney, Anglo Far East, Kitco unallocated pool... they are all private companies whose word (and existence) you're simply trusting.

So, what is the best way to hold gold? A burning question!