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Monday, October 06, 2008

Disinflation first then lots of inflation...

This explains the pig pile into gold by the well-heeled (see Wealthy investors drain supplies of gold by hoarding bullion bars). If not only the US but economies worldwide face deflationary forces, and currency depreciation is the final "foolproof way out" as espoused by the current economics orthodoxy, then competitive currency depreciation is the logical end game as governments pull out the stops to prevent deflation.

I remind readers that our comments and forecasts on central bank policy should not be construed as approval. We cannot help our readers prepare for the future if we try to impose our own theories on how the economy, financial system, and monetary systems should work. We are interested in what the Fed and other central banks are thinking, not how they should be thinking. We'll have time for that later. So far careful observation of that has yielded, unfortunately, accurate forecasts.

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