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Friday, July 30, 2010

Do You See Inflation Followed By Deflation and If So When?


Do you see inflation followed by deflation and if so when?


That's a tough call to make. It will probably happen after foreigners stop buying Treasury bonds unless they get double digit interest rates. At that point the Government will not be able to "borrow their way into prosperity" any longer and will either have to raise taxes to draconian levels (politically unpopular) or they will begin to attack the Federal Reserve for causing all the economic problems and begin to investigate them for crimes (politically popular). 

This will be sort of like the pot calling the kettle black. The real motive will be to eliminate the Federal Reserve so that congress can begin printing money without borrowing it from anyone. That is when inflation would be likely to ignite. I would guess 3-5 years but it could be sooner. 

Just keep your eye on long term treasury interest rates and any "Righteous Indignation" towards the Fed that begins to come out of Washington. That will be a strong signal that it is time to exchange your worthless paper dollars in for anything that is real and tangible. (Gold, Silver, Real-estate, etc)

As a quick recap, during deflation you want to move your assets into cash and during inflation you want to move your assets out of cash and into commodities.

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1 comment:

  1. Inflation is the problem not the solution. Is everybody brain dead. When prices rise wages lag prices for 30 40 maybe even 50 percent of the working age population. Another name for this condition is the race to the bottom.



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