QE1 didn’t work so why should QE2?
I can’t think of a reason and it sems that in the past few days I am not alone. Few investments have been at the front of the inflation wave” as much as Gold. We all know the story, it went up about 30% or so since August and Glen beck said that it will go higher and Weimarch republic is around the corner.
OK sure but I am not so quick to buy into the uber inflation scenario. First and foremost because unemployment is not budging, in fact they had to fudge the numbers to “produce” a half ass seasonally adjusted number. Second because upon close inspection the move up in gold has been looking a little suspect in the past three or so weeks.
Don’t get me wrong I too am looking to buy gold , but it will be more of a hedge against Obama’s incompetent foreign policy and the probable desperate adventure that he will undertake to prop his numbers – God help us.
Right now however it looks like gold may be showing us that Bernanke has no clothes, or at least that the price of his suits is not going up. In the past four days gold has declined and the GLD ( the gold index) is showing troubling signs of a pretty serious correction. In the picture you can see some of the reasons I say this and yes after this much of a quick decline it is very possible that we get a bounce tomorrow or Thursday or even Friday. We will be able to gauge then what kind of strength is in this move.
The point to ponder is this. What the heck do we do if we pump all this money into the economy and there is no inflation? What are the options?
Well there are three possible outcomes.
The first is of course that we stay in this sickly 2.5% growth economy and the other two are much worse.
The second possibility is something called a stagflation. Stagflation is better known to the world as the conditions which produced the “Misery Index” brought to us by the” peanut plague” Jimmy Carter and the disastrous Keynesian policies of his term – much like Obama’s Keynesian policies. What happens is that commodity prices do increase but the economy does not recover and unemployment remains high. The primary cause of Stagflation is the rapid increase by the central bank of the money supply just like QE2 does. The other cause is the excessive regulation of markets and industries by the government, just like Obamacare and the disastrous Financial Reform Act and myriad of petty and meaningless regulations imposed by the Obama bureaucracy. A sure sign that we are in or heding for stagflation will be the politicians calling for a raise in the minimum wage to keep up with “inflation” while we have 10% unemployment ! By then of course we could be waiting in long lines to buy subsidized bread.
The third option is depression. Ain’t f–g socialism grand!