Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Collateral Damage in the Inflationary War on Economic Depression

Commodities / Gold and Silver 2010 Mar 10, 2010 - 01:00 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis Article "Just allow it...just admit it. It doesn't matter where the inflation comes from. Just let it stay..."

SLASHING the Bank of England's base interest rate to an historic low of 0.5% was supposed to "rebalance" the economy...tipping it away from galloping consumption towards an export-led recovery.


But all that the Pound's slump since rates began sinking in March 2008 has done so far, however, is gift a 50% gain to UK gold owners.

"While we were hit with a great recession, we now know that the world has indeed avoided a great depression," said UK prime minister Gordon Brown at a Reuters press conference in London this morning.

Just as with the war in Iraq, however – another "shock and awe" campaign planned with little thought for the collateral damage – we'll never know how things would have panned out if brave men like Brown hadn't done "whatever it takes". And just like in Iraq, victory has been declared way too early.

New data today showed industrial production in the UK sinking to 1991 levels. The employment rate has sunk back to 1996 levels, meaning a net loss of private-sector work when you allow for Brown's intervening civil-service jobs jamboree. And despite the collapse in Sterling, the UK's trade deficit has been widening for more than a year, verging at last count on the record 3% of GDP hit at the very top of the credit bubble, 2005-2008.

"Let us be clear," says Brown, "the economy is growing, but remains fragile."

And the cost of this success...?

  • The interest paid on the average cash ISA account now lags retail-price inflation by 3.3 percentage points per year – the worst real returns to cash in over three decades (source: Bank of England and ONS data);
  • Annuity rates have fallen by 6p in the pound, offering barely £6,000 per year on pension savings of £100,000 (source: WilliamBurrows.com);
  • Real wage growth – on average, and after inflation – has gone negative for the first time since 1974, falling well over 1.5% since March 2008 (source: ONS data).

Not quite depleted uranium. But just as insidious.

"In the medium to long term, inflation has to come through," says Nouriel Roubini's latest fixed-income hire at RGE Monitor, former Citi managing director and wealth-management strategist, Arun Motianey.

"Just allow it...just admit it. It doesn't matter where the inflation comes from. It doesn't have to be through monetization of public-sector deficits, although at a pinch we may need to do that. What I am saying is that if we do get cyclical [demand-driven] inflation, then let that inflation stay...allow it help to write down the real value of debt."

Naturally, Motianey was talking to CNBC this week because he's got a book to promote. (We're all shills in the end, remember.) And naturally, so as to make a few a sales, his policy prescriptions conclude with handy tips for investors on "How do you preserve purchasing power, how do you preserve savings?" amid the inflation which Motianey says we should (and shall) get.

We can have it both ways, in short. Debt can be inflated away, while creditors are somehow protected. I can't say whether gold bullion is part of his saver's solution. But when fixed-income economists beg for inflation...and pretend that savers won't get screwed in the process...you've got to wonder where else you can hide.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 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