E! Seems to me, the higher energy prices get built into a lot of production processes, and of course are inflationary to the extent that consumers can't shift to alternatives (U.S. natural gas, vice foreign oil, eg). That article does a great service by pointing out the deflationary aspect of importing oil at high prices when the seller can't spend all the dollars received for his product. Since higher costs also hold down production, (a potentially inflationary situation if demand is not restrained in some way in the face of inadequate supply) , there is an odd balance of inflationary/deflationary forces at work. Net, net, we should see any whiff of inflation turn up in a higher gold price. If that doesn't happen, we would have to assume that the deflationary forces are winning in the current economy. For that reason, I would question a heavy commitment to gold as my investment vehichle for now.
As something of a tax on consumption, the higher oil prices would appear also have the effect of keeping some folks out of the marketplace -- at least in economic theory....
But we can chat about that more tomorrrow, I guess.
tso. |
