Pluto

Gold closed at 911 today. Sometimes I think they do stuff like that on purpose just because they can.

So, by big dollar holders you are implying that commodities will increase in price regardless of M3 numbers. Then the money would have to moved from somewhere else, which would cause a collapse in price somewhere else. No, we need new money for more rising prices.

I agree with most of what you are saying, and don't get me wrong I believe in Gold regardless of inflation of deflation. The point I am trying to make is this: At the end of the day it doesn't matter what Fed does, they print as much money as they want and they to, they can bail out every single bank in the US even. However, if the money the create or print never makes it into the economy prices won't rise. In recent years the money has made its way into economy via mortgages, refis, and MEWs. These were the conduits for getting the money into the masses pockets so they could spend, which were shown in M3 stats. Now, lets fast forward to the future, what conduits are there going to be for getting the predicted 18% / annum M3 money into the economy. What you are saying is that money created in the future will find its way into commodities. If that is true, there is going to be a few problems like the CPI numbers, which will flag increases in commodities, but did not with housing.

Yes, but for prices to rise in the economy the money has to make its way into the economy somehow. This can done three ways as far as I am aware: 1) Wages 2) Borrowing 3) Give it away. Now, we can agree on 1) no happening 2) has stopped 3) Well that is all they have left, but even then if they give it away and folks hoard it because they thing tough times are coming, this won't work. Now, there are lot of dollars off shore, if these found a way back they would be very inflationary, but that is not more fed printing or increases in M3.

You are looking in the rear view mirror. What is important is what the M3 numbers will be like in 6 months and noone knows. Even if your predict 18% in the future, where and how is this money going to get into the economy creating inflation?

I understand what you are saying, but what vast inflationary pressures are you referring to? Now be specific here, not just the Fed printing money, because that is not inflationary unless it has velocity, and until it has a conduit into the economy its velocity is zero and not inflationary. What I think is really irrelevant, but what the markets are telling us is. The bond yields have reached a 50Y low and all asset classes have or are deflating. Now this very well may be a correction, but until the signs point to more inflationary expectations I will not buy anymore.

I have physical gold, silver and palladium. I don't intend to sell one oz. It is not only my savings, but my insurance policy which never expires and can be passed on. Remember, when banks fail you lose your lolly. And you can forget about those insurances like FDIC in the US or the 35K in the UK. They aren't designed or meant for total bank failures, especially multi-national clearing banks. Anyone who has ever read my ramblings will know that I believe in physical gold under my total control, as it is my insurance policy. I do want to be scrambling around on the internet or phone begging someone make good on their promises, when I need cashing in. If gold goes to $200, that is fine with me, it means my insurance never needed to be cashed in and everything is fine in the world. Somehow, I am not that optimistic. Most corrections I've seen haven't been like this one. As I have said before, this happened after a 1/4 then 3/4 slashing of interest rates, and a top investment bank being stolen by the Federal Reserve (JPM are stockholders of the Fed). Also, the short term treasury yields sunk to a 50Y low. Gold's recent climb has been mainly because of inflation expectations for the future; however, if we've had our inflation burst then expectations looking forward may be declining, which the bond market is indicating. I also said, I would not be in the market for PMs right now until we get a clearer reading from the markets on inflation expectations. I know we have what seems to be horrendous inflation right now, but that may not be the case in the future.

Just look at today. JP Morgan up 9%; Silver down 9%. Silver has crashed this week, there is no way round it. It went from over 21 at the start of the week (four trading days ago) to 16.75. That is a 25% reduction in four trading days. As for letting inflation rip - I keep going back to the bond markets - and they should be pricing in inflation and they aren't. This is what is enabling Bernanke to keep lowering rates. Now in the US, I can tell you this: Rents are down, property prices are down, price for contract labor is down. Now fresh food and veg and petrol is up - but it seems everything else is heading south. A brand new Ford Focus 2.0L can be leased for $169.00 per month. That is down from last year. Once commodity prices really start filtering down even more, then is game set and match for Bernanke. I think he is getting the banks recapitalized and on sure footing as much as possible before he pulls the rug from the economy and sends it into a recession/depression. I understand the hyperinflationary depression, but I can't see them getting away with it. Lots of news outlets seem to be priming everyone for a depression right now.

Yeah, your take is pretty well spot on. However, the inflation they are going to create this time around is going to show up in worldwide stats like CPI. There is no way inflation on food and energy cannot show up. Also, China for the last 10-15 years has been exporting deflation, which has been contributing to our CPI numbers being subdued. It is going to be a real feat for the bankers of the US to try a carry trade like Japan did. Most of the Yen Carry trade found its way into worldwide property prices, which was generally accepted by the masses and did not surface in Central Banks' targeting numbers. So I not sure the same could apply again with the US.

What the poles starting buying kruggers then? No, I know, it's the olympics silly. All those gold coins for the winners...haha

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A 9/11 event is when you want to be queuing to buy PMs. No one can default on Gold it is real money.

To answer your first question you have to look at what happened in Japan. Japan has a ZIRP and government bail out of banks and still no rising prices. Infact they have been suffering from deflation for years. For inflation to take hold and and end up with hyperinflating you need rising wages. Without rising wages (or borrowed money to spend) you are going to cut back which starts a deflationary spiral. At the end of the day if no-one is going to borrow from banks because of tighter standards then all the money the banks get from the fed wont get into the economy pushing up prices. The money has to get into the economy, that is why Bush is bypassing banks and giving money directly to the masses, however this will also fail if they don't buy goods and services with the money. As I said before the bond market is not seeing inflation and therefore is predicting the fed is going to fail, whether they do or not is the 64,000 dollar question. Treasuries are risk free investments paying the lowest yield in 50 years - the last thing you want to get into if you are predicting inflation and the best investment if you are predicting deflation.

The commodity markets are brutal. Pull up a five chart of oil to see what a roller coaster it can be. I think is it is designed that way to keep most conservative investors out.

Here comes another flurry of solicitors letters. hehe They want them to stop talking about Gold but they wont, and now the owner of BV is even joining the fray. What next? Krusty and Phil signing up. Now that would be funny.

I don't think you should dismiss the huge bond market because they simply don't know any better. I am just pointing out for those not paying attention, that the short term US treasuries hit a 50Y low just after the IRs in the US were slashed by 100bps. Now, of course the bond market could have it wrong and inflation expectations will surface and therefore yields will increase, but that is not what is happening right now. It could be that today is options expiry day and end on month/quarter and financial companies want to show treasuries on their balance sheets..I don't really know, but let's not lose sight of this as a potential reason Gold got smackdowned the last couple of days.

I am just telling you how I read the bond market right now at 50Y lows for short term treasuries. The bond market is not expecting the Fed to do this, otherwise they would be pricing in more inflation, but they aren't. Now, the bond market could reverse. I agree that according to the Fed deflation is not an option, however, they may come a point when the Fed loses control and it doesn't matter what they want anymore. Remember, Bernanke wrote his thesis on the Great Depression, and you have to wonder why he was picked for the job, and that he may be guiding us into a depression softly. Either way, Gold will not default, so it is really your only method of storing wealth (apart from cash under the mattress of course) which could be futile if they do decide to switch to the amero or euro. It is no coincidence that the dollar and pound are both performing the worst out of all currencies in the industrialized world, and both are heavily rumored to switch to other monetary bases.

As I said yesterday keep an eye on US short term treasuries, they are at a 50Y low. The bond market doesn't believe any more inflation is possible and Ben is fighting a losing battle. Look for the dow to go down below 12K today as confirmation. Look for short term treasury yields to start increasing before buying any more gold or silver. As usual do your own due diligence. Job claims rose again today. For more inflation and ultimately hyperinflation we are going to have to start seeing wage inflation. Without wage inflation we are ultimately going to see deflation, recession, and if the banks start to keel over a depression. Remember Gold and Silver do very well in a depression - as it is the ultimate store of wealth that can't default.

We hit 1,030 a couple of days ago.

Dollar rallying against all currencies right now. This is not just about the gold markets - this is the perfect storm brewing.

I think the fear is the market realizing the fed may be losing control. If we see the Nikkei tank hard we could see a really black Thursday for all markets.

There is flight to treasuries, which has caused the 3m yield to dive, the commodity market is selling off, the equity market is selling off, an internet poster caused sterling to lose 250bps and HBOS to dive 20%. All this after 1% cut in rates and one of the largest investment banks being gifted to JPM. No something is up and we need to keep an eye on all markets.

ZIRP as the Japs had doesn't necessary provide more inflation. This was about liquidity, but has now turned into a solvency problem, which I think the bond market is sniffing. If the bond market is right we are in for one humdinger of a crash. Stay in Gold and cash.

The equity markets are being supported by Fed actions and not company fundamentals. That is why bubblevision talk about the Fed all day and what they are going to do next.