Rapidly rising prices in the emerging world are the cause for great concern, driving some investors out of the inflationary frying pan (China, emerging resources based economies) and into the fire (the US and to a degree, Europe, the developed economies with relatively less intense infla... I mean, price increases). Get this; inflation is not rising prices. That is a consequence of the inflation promoted by a Federal Reserve that continues to monetize the bloated, legacy debt even though we supposedly have economic recovery taking hold.
Fed Likely to Press on with QE Even as Business Lending Rises
The longer that gold remains under pressure from 'da goonz', the better the opportunity. Meanwhile, here is an updated graph, compliments of the St. Louis Fed, which was shown in NFTRH several weeks ago and excerpted here on the blog: Bank Loans Gently Bottoming?
The message was among other things, do not be a deflationist in this environment. This is why asset markets are rising; when money gets really scared (as the EFFECTS of inflation become more widely known) and becomes aware of the extent of inflation, we may indeed have a boom. But it may end up being von Mises' Crack Up Boom.
The signal in the gold-silver ratio would argue against this scenario, however temporarily. But gentle Ben is working not to let the GSR signal get out of control. The question remains, do you believe this great purveyor of 'inflation as economic driver' can control the markets indefinitely?
Anyway, here is the updated Bank Loans graph courtesy of St. Louis Fed. This still looks like a bottom I would buy, which means that the deflationist's 'velocity of money' argument could be about to go out the window, possibly along with my personal 'gold stocks above all others' stance, which requires an impulse toward economic contraction. I think the miners would do fine in the early stages of an inflationary economic recovery, especially considering the much needed sector correction that persists to this day (with some associated and compelling technical data points).
If - and in my opinion it's still a really big if - things stand on their current course, the US is setting up to stand alone as the nation that once again shows 'em how its done when promoting inflation. Down the line, the US will be forced to fight inflation the same way the global stewards of non-reserve currencies are forced to do now. Inflation is happening 24/7, gold is conveniently getting smashed and this is a war, not a battle.
Gold is fine, and if Ben gets his way, silver could yet be even finer, from a momentum perspective. But right now, as silver declines vs. gold, there is a negative divergence to inflationary aspirations.
Thus ends a rambling, somewhat jumbled post by blogger who is out of time. http://www.biiwii.blogspot.com
