Bill Bonner, still in Paris...
*** Hmmm...Gold dipped to $408. We're wondering if it will sink down to our most recent buying target - $400. Or, should we buy now? We don't know, dear reader. Will we get the violent correct we've been expecting? Or will we never see $400 gold again in our lifetimes? If we only knew...
*** "DEFLATION HAS ARRIVED."
We quote Bob Prechter from our own Daily Reckoning of last Wednesday.
"Virtually everyone - and I do not use that word lightly - believes that inflation will accelerate...The general population is convinced that prices of their homes and property can only go up... "This consensus is not merely overwhelming, but reflects a belief as vast and deeply held as a religion. Investment News in September reported a survey by the National Association for Business Economics in Washington. It revealed, 'None of the respondents to the May survey, all of whom were responsible for making macroeconomic predictions, predicted a decline in the consumer price index during the next two years.' USA Today confirmed the fact, reporting, 'Not one economist [of 67 surveyed] said it was "very likely" the economy would slip into deflation.' That is a consensus! "As this is written, not a single major newspaper, magazine or TV network has done a story on the dramatic contraction in M3. People are so drunk with inflationary certainty that they can't even see that deflation is happening. And if they do, they don't believe that it is meaningful... "The money supply might rebound for a quarter or two as the stock market and economy top out this year, but at the largest degree of trend, the credit bubble - 70 years in the making - has burst..."
*** And Richard Russell on the same topic:
"...The forces of world over-production and deflation are at work. But so is the Fed. After a long string of losses in the broad (M-3) money supply, two weeks ago M-3 surged $30 billion, and the latest figure for the week ended January 12 showed M-3 shooting up a monster $37 billion. The Fed, it seems, has decided to go all-out, preparatory to the November election. Greenspan has taken the lid off the M-3 money supply, and the word, I assume, is 'Let 'er rip!' "As an aside, two weeks of this kind of money supply growth would buy all the gold stocks in existence."
*** And here...a note from David Theroux of the Independent Institute:
"Thank you for your great recent article, 'Lost In Space'! The question to ask is: Has the 'Era of Really Big Government' now arrived?
"Over the past three years, with inflation at record lows, federal spending has increased by a massive 28.3% - with non-defense discretionary growth of 30.5% - the largest deficit in U.S. history and the highest rate of government growth since LBJ.
"As predicted by Bob Higgs, senior fellow in Political Economy at the Independent Institute, this explosion of government power has only been possible in the aftermath of 9/11, as politicians take full advantage of a frightened American public.
"During this time, President Bush has become the first president since James Garfield (serving only in 1881) and Millard Fillmore (1850-1853), neither serving full terms, and then John Quincy Adams (serving a full term, 1825-1829) not to have vetoed a SINGLE bill, with the result that we now have record pork spending on agriculture, education, Medicare, energy, transportation, foreign aid, etc. Meanwhile, federal agencies have been given new powers to secretly search any American's property and intercept phone, Internet, and other communications, as well as health, financial, and other records.
"During this period, there has been near silence from most Washington think tanks and the media. According to former Congressional Budget Office director Rudolph Penner, 'I don't remember a time when there's been so little commentary on it, and I can't really explain it.'" |
