Inflation Concerns And Bursting Bubbles

Posted by Jason | Posted in Economics | Posted on 03-12-2009

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It looks like some of the Fed’s insiders aren’t joining Bernanke’s suicide pack.

Yesterday it was Philly Fed’s Plossner, today it is Richmond Fed’s Jeff Lacker who joins the chorus demanding an end to Bernanke’s insane monetary policy of drowning the market with unprecedented liquidity which is not getting to consumers but merely propping Amazon stock at a bubblelicious 100x P/E.

In a speech before the Charlotte Chamber of Commerce, Lacker stated: “The perception of inflation risk could be particularly pertinent to the current recovery, given the massive and unprecedented expansion in bank reserves that has occurred, and the widespread market commentary expressing uncertainty over whether the Federal Reserve is willing and able to promptly reverse that expansion… If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery. In assessing when we will need to begin taking monetary stimulus out, I will be looking for the time at which economic growth is strong enough and well-enough established, even if it is not yet especially vigorous. Although it is hard to predict when that will occur, I can confidently predict that monetary policy will remain particularly challenging for some time to come.” Then again, the stock market does not seem to share Mr. Lacker’s concerns.

via Uh-Oh: One By One, The Fed’s Inflation Hawks Are Speaking Up.

Remember what I said about the S&P? When the Fed prints money, it flows somewhere. We may not have seen inflation yet, but that could be because regular consumers haven’t seen the money yet. On the other hand, it sure seems like there is inflation in stock and gold prices.

Typically, the money flows into some investment vehicle, most recently real estate and tech stocks before that, and then it all comes crashing down. I sold my S&P holdings (not that I owned much), and I’ve held off on the gold surge. I have a feeling both are going to come crashing down as the  next bubble bursts. Then again, what the hell do I know.  I’m just an IT guy, who loves the free market.

FYI, here’s a chart going back to the civil war for gold prices from Businessinsider.com. Again, I think there is a bubble about to burst.

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Here are some things to consider.

http://news.goldseek.com/GoldenJackass/1259100000.php

http://silverstockreport.com/2009/gold-pool.html

http://silverstockreport.com/2009/silver-better.html

Read this article from May, I have seen a recent chart and the ratio is still very high. Either the Stock Market will crash or gold must go a lot higher.

http://www.beyouranalyst.com/2009/05/dow-gold-ratio-and-silent-us-stock.html

At least gold and silver does have some intrinsic value, I can’t say that for the dollar or stocks.

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