Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Gold, Keeping it Simple

Commodities / Gold & Silver 2009 May 21, 2009 - 11:22 AM GMT

By: Chris_Galakoutis

Commodities

Best Financial Markets Analysis ArticleThere can be little doubt that the US economy is in uncharted waters.  The crash of 2008 and the US government’s response -- and the world’s response, for that matter -- were unprecedented, which means that many of the old rulebooks get thrown out the window. 


With markets having stabilized and rising, however, the search is on for the next great bubble, the asset class that will be the recipient of worldwide money printing efforts.  The famed Milton Friedman, a monetarist, did argue that after a small lag an easy money policy would bring on a sharp recovery in stocks and the economy.

While we are not so convinced about a long-lived economic recovery given the nature of this collapse, a case can be made that the enormous quantity of new money could act as fuel for a continued stock market rally.  If that is to be the case, we needn’t look very far for which stocks to own. 

Newly printed money always flows somewhere, and not necessarily where governments want it to flow.  That said, government can lay a foundation that increases the probability that new money will flow where it ultimately wishes for it to flow -- the so-called “good inflation” of stocks and real estate, and away from where government decides it doesn’t wish for it flow, the so-called “bad inflation” of consumer prices, metals and commodities.  Good vs. bad inflation is a silly notion of course, as there is only inflation and it is not a good thing, but it does illustrate quite nicely how government doesn’t think.

For example, the 1990’s came with the Y2K phenomenon, and therefore easy money from the Greenspan Fed flowed unencumbered into the NASDAQ and technology stocks.  The dollar rallied during that decade and gold declined to its low in the mid-$200 range by 1999.  It was to be a “new era,” where problems of the past, such as inflation, would be buried for good, along with the barbarous relic that is gold.

This decade, we witnessed the epic housing bubble, which “bailed” the country out of the stock market collapse of 2000-2002.  With tax breaks for homeowners, low interest rates, Fannie and Freddie, and President Bush telling Americans to go out and buy a home, it is easy to see how government policy tilted the playing field, allowing for easy money to flow into real estate.

But note the key difference, and more importantly, the trend change.  Unlike the 1990’s, gold and the dollar went in opposite directions in the 2000’s, offering up an important clue to astute investors: government would be unable to hide the inflation it was, and had been, creating.  Thus, expectations had changed, and gold started to move higher as a result of those changed expectations.

Therein lies a critical point.  Despite the fact this decade witnessed an enormous housing bubble, i.e., government got its way and was successful at creating another “good” bubble recipient of its money printing efforts that temporarily bailed out of the economy, some of the new money nevertheless flowed into precious metals and commodities as well, taking gold up almost five-fold hitting a little over $1000 per ounce.  Money flowing into gold was a result of the change in inflationary expectations, a trend that, given the trillions of new dollars that today are flowing from the Federal Reserve, remains firmly intact, if not accelerating, in our opinion. 

We are therefore not sweating the search for the next great bubble, and sticking with the theme that has done quite well so far this decade.  Of course, one can only imagine the returns if there is no “good” bubble to inflate with the trillions upon trillions of new dollars this time.

By Christopher G. Galakoutis

CMI Ventures LLC
Westport, CT,
USA Website: www.murkymarkets.com
Email: info@murkymarkets.com

© 2005-2009 Christopher G. Galakoutis

Christopher G Galakoutis is an independent investor and commentator, who in 2002 re-directed his attention to studying the macroeconomic issues that he believed would impact the United States, and the world, for many years to come. He works diligently to seek out investments for his own portfolio that align with his views, and writes about them on his website. With a background in international tax, he also works with clients holding foreign investments (ExpatTaxPros.com), ensuring their global income tax costs are being minimized.

Christopher Galakoutis  Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules