Inflation Risk

Todd Zywicki explains:

Why has this incredible boost in the money supply had no impact? Presumably because the “velocity” of money has remained low–people and banks are hoarding money, rather than spending, borrowing, and lending it. Assuming velocity rises again, however, we may be looking at an inflationary spiral like we’ve never seen before in this country.

Peter says it well, “We’ve Never Been Here Before.”

I keep joking to Bitter that I need to buy some gold sovereigns.  Maybe it’s time to stop joking.

12 thoughts on “Inflation Risk”

  1. I think it has to eventually in the long term. A budget deficit by any goverment is by nature inflationary. The question is how long will it take before you see an effect, and how big will that effect be.

    If the money is paid out but no one is spending it, like that article said, the effects will take longer to see.

    Does anyone know if there has ever been a goverment budget deficit by any country, ancient or modern, anywhere in the world that has been greater than Obama’s budget?

  2. I’m starting to think we are pissing our childrens wealth into black holes where the money just disappears never to return agian. The black holes have names like Citibank, AIG, etc.

    I think the smart money knows that as well which explains the pullback of GLD.

  3. The time to buy gold was a few years ago, not now.

    Once it becomes clear that The Sky Has Not Fallen, I expect gold to drop by a few hundred dollars an ounce.

    Which reminds me that I should sell the most-of-an-ounce I have, and got when it was under $400.

    Steve: The only useful measure for “greater” is “as percentage of GNP”, remember*. I believe there was more debt in the US relative to GNP during World War 2.

    * Otherwise a lower proportion of debt from a much bigger economy would look like “much more debt”, when in every way that matters it’s “less debt”. In other words, when Lower Slobonia is in debt 500% of GNP, it’s hosed, but when the US is in debt under 80% of GNP, that’s far less worrying.

  4. Sig,

    Are you shorting or buying?

    I’m paralyzed from action. I know if I go short, Obambi will announce the ghost of Ronald Reagan spoke to him and he’s going to cut taxes and shrink government.

    If I go long, I know Obambi will continue doing what he is doing with the aid of Sen. Specter. I’m watching NFLX and MYGN get to thier 50dma and I don’t have the balls to pull the trigger.


  5. You may wish to google Gold and Patriot Act before you get carried away with the purchase of sovereigns.

    On cursory examination, the information is a bit spotty, but it seems that as long as it is coin with a printed face value or rare / antique everything is groovy. It also appears that bullion is not so groovy.

    Of course, I could be grazing somewhere far afield from the truth on this, but thought you might like to know what is out there… if you didn’t already.

  6. The real problem at the moment is that the Chinese are apparently counterfeiting the hell out of damn near all the gold coins out there.

  7. I would something that is also solid, metal, and likely to be more immediately useful if things go as badly some have warned. It’s hard to shoot a mob breaking into your house with gold sovereigns.

  8. That’s true Ken. I shouldn’t forget that. We also shouldn’t forget that silver can be melted down into bullets. Because we know exactly what follows financial collapse right? Werewolves!

  9. Zombies first, then werewolves. After that is vampires followed by space aliens.

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