Reply #12: This part was of great interest too -- [View All]

[truedelphi]

Our world is more like 1930s Germany, where deflation is pressuring the general price level, and certainly wages as well. Deflation is rampaging through property markets everywhere, it is pushing salaries, wages and bonuses down (with a few exceptions), it is the scourge of the retail industry and large parts of the food industry.

To combat this, which the Fed sees and fears, interest rates are at zero percent and quantitative easing is the order of the day - the buying of debt by the Fed to inject liquidity into the economy. The Treasury at the same time is borrowing record amounts as if the US were in some dire war (well it is, against deflation). All this reflation is feeding into inflation, but not the price and wages type. It is asset inflation we are seeing - gold, silver, oil, copper, equities, high yield debt. We are getting a replay of the housing bubble and the tech bubble, only each replay gets narrower and narrower in terms of the assets which participate. Hot money is chasing after housing - there are plenty of speculators buying 50 houses at a time in auction - but the effect is muted because of the large deflationary overhang in inventory. There is no such overhang in gold and copper and oil so their prices are able to go up, in gold's case in bubble fashion.

Now we will rue the day we didn't give them that contract to watch over our ports and defend our Homeland!!