Inflation, Deflation, or a pure mess.

Do we have to worry about gold?

In my view, just buy physical gold and silver, GDX and GDXJ, and keep them. Gold
will go up. How much depends on policy actions. In particular, whether or not the
US government chooses to pursue very accomodative fiscal and monetary policy.

On the charts front, reconstructed M3 from Bart at and John
Williams at shows a decline. However, inflation is picking up,
and the Fed printing so far is going ballistic.

The Fed emits tightening noises, but, given US employment situation, rates will
stay at Zero for a long time. The printing program will end in March, while the
government mortgage subsidy program ends in April. Then we will see how the economy
performs without direct money printing support, or what the Fed will do if it falters
again. This could be expected, since an enormous credit bubble popped in 2006-2008.


Chart of U.S. Money Supply Growth

Chart of U.S. Consumer Inflation (CPI)

Saturday, January 9th, 2010 Precious metals

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