Guys, we get it. We have been watching this and other money supply indicators for months now. We get that it took only a simple flattening of money supply growth to bring on the destruction of 2008. We get that what has been happening for a year now is a significant flattening, post-inflationary hysteria.But D Boys, you are a lever. When will you understand this? How many times do you have to have your chain pulled before you finally catch on? We get it, deflation is the only possible outcome.
But what happens during these episodes, just like clockwork as long as public confidence - tattered as it is - remains intact? Why, the herd does what you recommend and at the height of recognition (which, for the herd is usually way too late) stampedes into treasury bonds. Hey, I own some treasury funds too, but in shorter durations and NEVER as an investment.
The point is that when the deflationary hysteria hits its peak, the government's primary funding tool is once again flush with resources. Why do you think the recent flirtation with the long bond's EMA 100 "line in the sand" was so important? It was because a break higher in rates would have signaled the end of the Treasury and Fed's ability to hide behind the curtain and pull the levers. Now, an ongoing system does not want to see its ongoing modes of operation break down and with an oncoming deflationary (whiff? episode? impulse?) event, all is as it should be for the system to continue on for now.
When the D Boys become most strident, cock sure and most especially when they begin lecturing, I will feel secure that it will probably be time to improve my stance on the gold sector. As it is, I am already pretty constructive on it. For now, I am going to take a seat and watch the deflationists, gold bugs and inflationistas battle it out.
