Time to Get What's Coming to You
Another challenging week for the American economy…because despite the continuing rally, the past five days were marked at least in part by inflationary concerns. The unfortunate side effect of quantitative easing is taking its toll across the economic landscape…most visibly with increasing gas prices, but perhaps most destructively in Treasuries.
In this week’s highlight of the week, Bill Bonner takes a thoughtful moment to enumerate the economics disasters we’ve already watched quickly unfold, and also examines the cost inflation extracts on your personal wealth…it’s not pretty.
We continue to travel down a very dark road…and it’s difficult to make out exactly what’s at the end of it. The details just aren’t clear, but sadly enough the rough outline in the approaching distance is…and it’s nothing less than both depression and hyperinflation.
Enough… Let us delay no longer, nor distract anymore, from the original work’s majesty. Read on for an excerpt from Bill’s highlighted essay…
“Yesterday, for the third day in a row…not much happened in the markets. The Dow fell 24 points – hardly worth mentioning. Gold held steady at $955. Oil rose a dollar – to $71. And the dollar itself remained about where it was – at $1.39 per euro.
“It is as if everyone were waiting to see what happens next. Let’s see…
“We’ve seen the biggest stock crash in history…
“..the biggest property crash in history…
“..the biggest deficits in history (four times the previous record!)…
“..the biggest bailouts in history (we can’t even count that high)…
“..the biggest bankruptcies in history…
“..the auto industry and the finance industry have been largely nationalized…
“..the president of the United States of America is now making financial decisions for formerly private industries…
“What’s left to see?
“Oh yes…the depression…and hyperinflation.
“‘Get ready for inflation and higher interest rates,’ warns Art Laffer in the Wall Street Journal. Remember him? Creator of the ‘Laffer Curve.’
“But don’t worry about inflation, adds Harvard professor Gregory Mankiw, also in the Wall Street Journal: Inflation is just what we need. ‘In the current environment, the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative…’ to force people to get rid of their money as fast as possible.
“Over in the bond market, investors are finding out what a little bit of inflation – or even hints of inflation – can do. People bought US Treasuries during the panic of ’08 for safety purposes. Now, they’re getting what we predicted. Alas, yes, they are getting what they deserve, not what they expected. Our friend Chuck Butler points out that prices of 10-year Treasuries have come down from $110 as recently as 5 months ago to just $94 this week. How’s that for safety – a 15% loss!”
The above is but a smidgen of Bill’s deep reflection in this highlight of the week essay. You’d be doing yourself a personal disservice to stop reading here. If you’re seeking a better understanding of what’s in store for the US economy you should continue on…and read the rest of this essay here.
Comments: