Gold
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Gold.
My thoughts:
Cash4Gold and similar organizations are telling me (and anyone else who listens to AM radio [yes I'm a masochist]) that we're about to go into an inflationary spiral, and that Gold will be the safest commodity to invest in for your future. This means to me that anybody who has Gold shares should sell them right away because the people who have the most gold are trying to do just that. I also think, as a corollary, that we will be entering a deflationary spiral, rather than an inflationary one.
I'm just convinced that right wing radio and Cash4Gold are trying to make money from stupid people.
Thoughts? -
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Well, Andrew, we agree on something. Shocking, I know.
Here's the case for inflation (really dumbed down, forgive me, but the very in depth version of this would take too long to explain, let alone type in some coherent fashion):
US government prints money. Lots of money. See graphs. For all you nuts out there, data pulled from the St. Louis Fed and I made the graphs.
What does this mean? Well, when you print money you devalue it, just like any other standard supply/demand relationship. How does this relate to gold? Well, commodities usually have an inverse relationship with the dollar, so if the dollar continues to drop in price, commodities tend to go up. The reason is that when people don't want to hold the dollar, they rush into something physical i.e. oil, gold, copper, etc. There are more reasons why commodities fluctuate in price, but this is a fairly standard rule of thumb.
What I think:
The economy is in shambles. Consumer saving keeps rising, and consumer spending isn't rising fast enough. Ontop of this, in order to have inflation current prices need to rise. Do you want to spend $8 on a gallon of milk? The money is already out there, and in order to have successful inflation you, the consumer, must be willing to spend $8 on milk. Or whatever your example is, you need to be willing to pay more than you currently are paying now. This will never (in my opinion) happen. At least, not now. So what are our other options? Disflation (what we're currently in) which may or may not lead to deflation. Disflation is a decrease in inflation rates (ex when the inflation decreases, but still remains positive) while deflation is when the inflation rate turns negative. We haven't seen deflation on a Y/Y basis for over 60 years (I think, feel free to check this) and it almost always is because of a rising value of the dollar, not the other way around. Deflation comes with slowed production because rates for corporations rise, which lead to higher prices for goods, which, once again, brings us to the horrible paradox that is our economy.
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