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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: David W. Taylor who wrote (921)	9/21/2003 3:45:53 PM
From: que seria	Read Replies (1) of 110194

I concur re: your scenario. Inflation will follow deflation when the Bernanke theorem takes hold and gov't gets serious about inflation (which necessarily refers to the money supply, not the price of things). The feds have been facing too much deflationary headwind for their meager inflationary efforts, what with people exercising some common sense and survival skills about borrowing (more in business than personally). A policy of inflation will entail monetizing debt and liberally suppling cash to those who will spend it, thereby also driving out of hiding more dollars from those ordinarily inclined to save them. Taxes on wealth, taxes on cash, taxes on gold and collectibles. They can happen here. They may look like the best options if the feds recognize the destruction of essential entrepreneurial zeal that attends punitive income tax rates. The more people are hurting, the more options will be "on the table." The inevitable inflationary response of gov't to deflation will tank the dollar (if it hasn't tanked already). That will likely be relative to gold, as other nations do the same. That will put gold in a position of very long term strength in the U.S. and worldwide, unless/until gov'ts try to seize it or cut off its monetary role via taxation. An inflationary policy that works will not just put the feds behind the curve in preventing dollar debasement; they'll be trumpeting their success in getting there. I think we're far from that inflationary scenario now, although I agree with those who post about existing and coming rises of the prices of things we need, and the bogus nature of the CPI "measure." I just doubt we get inflation in the real, monetary sense until a new ruler is elected to deliver it, and his policies have had a chance to play out after taking office in 2005. It is the deflationary trend that I believe will deliver a correction in gold shares, relative to cash.

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