Hey all - figured I'd run this by you guys. Read a post on another forum last night looking for a strong case against precious metals. The only thoughtful nugget I found was the following argument -
The US is suffering, and will continue to suffer from, a large drop in aggregate demand due to unemployment and the second dip of the recession, and things don't seem to be looking much better. This normally would result in a deflationary cycle, but since Mr. Bernanke continues to print ad infinium, this is keeping asset prices propped up. In the absence of QE-infinity, we would be in a deflationary period a la Japan.
Obviously deflation is not terrible from a PM perspective since we are HOLDING our purchasing power in metals instead of fiat. Regardless, for someone who holds cash, there could be opportunities if the deflationary cycle does kick in.
Now - I'm having trouble reconciling this for a number of reasons. Mainly - CPI inflation tends to severely understate what we see in real life. Also, a period of deflation in the US would cause some serious economic ripples, especially considering for many essential goods we now must compete with a large and growing middle class in developing nations. So, food and energy may very well inflate while consumer goods will deflate (the well-understood biflation argument). Perhaps we will see deflation due to strength in the dollar, but I'm just hitting a wall trying to reason this entire thing out.
I will note I have not looked at any data on the money supply, credit etc, so perhaps I need to do some more research. Either way, I wanted to get your opinions on the matter.
Thanks.
The US is suffering, and will continue to suffer from, a large drop in aggregate demand due to unemployment and the second dip of the recession, and things don't seem to be looking much better. This normally would result in a deflationary cycle, but since Mr. Bernanke continues to print ad infinium, this is keeping asset prices propped up. In the absence of QE-infinity, we would be in a deflationary period a la Japan.
Obviously deflation is not terrible from a PM perspective since we are HOLDING our purchasing power in metals instead of fiat. Regardless, for someone who holds cash, there could be opportunities if the deflationary cycle does kick in.
Now - I'm having trouble reconciling this for a number of reasons. Mainly - CPI inflation tends to severely understate what we see in real life. Also, a period of deflation in the US would cause some serious economic ripples, especially considering for many essential goods we now must compete with a large and growing middle class in developing nations. So, food and energy may very well inflate while consumer goods will deflate (the well-understood biflation argument). Perhaps we will see deflation due to strength in the dollar, but I'm just hitting a wall trying to reason this entire thing out.
I will note I have not looked at any data on the money supply, credit etc, so perhaps I need to do some more research. Either way, I wanted to get your opinions on the matter.
Thanks.