gold-silver-prices-plunge-fiscal-cliff

[fb101]

good article;
worth the full read

highlights;

The Federal Reserve's quantitative easing programs haven't generated the inflation that the gold bugs expect.
Although the Fed has significantly increased the money supply, it's not being circulated as intended.
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Over the past two years, the monetary base — which includes currency in circulation and bank reserves — has increased 21.1% annually
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"A look at the overnight chart in gold shows a huge spike in selling during a typically light-volume period,
which indicates that 'somebody' is trying to drive the price lower," Vandenbord wrote.

Read More At IBD: http://news.investors.com/investing-etf ... z2ENwYkeW8

[Mossy]

The official inflation numbers do not include the price of food and fuel.

IMO, the inflation we are seeing is mostly the price of "other stuff" being pushed up by food and fuel, and held down by people not having enough money to buy that other stuff after buying food and fuel.

[inflationhawk]

It's not money supply alone that drives inflation. The velocity of money has decreased offsetting any gains in money supply. If/when velocity does pick up on a money supply this large, look out!

[mbailey1234]

It's not money supply alone that drives inflation. The velocity of money has decreased offsetting any gains in money supply. If/when velocity does pick up on a money supply this large, look out!

I totally agree with this statement.

I used to work for Cargill Inc. and one of their "market guys" claims they have about 3x as much cash sitting around as they need and nothing significant on the immediate horizon to use it on. They are like a lot of other companies and have the capability to hire a bunch of people and expand but they don't feel comfortable sticking their necks out with no clear since of direction from our "leaders". They also have some other significant hurdles due to dry weather and a shortage of corn and soybeans to process in this area. It's hard to make money when you can only run your plants at 70-80% of normal capacity. If we don't get some rain out here in the corn belt, it isn't going to be good next year! They have already shut down part of the Mississippi River since it is so low which is a major, major supply line for our area.

So anyway, his theory (and I agree) is when the cash reserves break loose that is when the big inflation will hit. The bankers in our area are just begging people to borrow money since they are swimming in cash. We have the supply, now when will it break loose? We are pumping up the inflation gun with cash, when (or what) will cause the trigger to get pulled? I wonder if there will come a point when they simply have no choice but to start raising interest rates to curb inflation, or will they just let it run it's course and make a boat load on capital gains and such?

On another note, he is very worried that we will see a double digit annual increase in electricity costs in the near future. I guess they purchase what they call a hard (or guaranteed) amount of available power and negotiate this every year. Prices are rising fast due to less and less surplus supply out there and with the current legislation prohibiting new coal fired plants from being built, he says we will "hit the wall" on electricity supply within 5 - 10 years.

[inflationhawk]

The trouble with raising rates is that most of our national debt is shorter term debt and will have to roll over. Even if the Fed wanted to raise rates to try and control inflation they really couldn't do it without shooting ourselves in the foot with higher interest payments. It's quite a pickle!

[mbailey1234]

Oh yes I understand what should be done and will be done are two completely different things. You about have to look at it from the view of TPTB so get ready to grab your ankles and take it.

[barrytrot]

Here is my theory as to why inflation SEEMS LOW:

Electronics.

Because of the deflationary pricing of "older electronics" it weights the average down a LOT.

Take video games (I just bought some of those as gifts): They are cheaper than they were 30 years ago! That means an inflationary change of probably negative 70% (or whatever).

Even last years electronics are cheap.


Anyway, just a random thought based on buying a few "Nintendo DS" games/machines.

And I could definitely be wrong as I honestly don't have a real knowledge of how they calculate inflation, but my assumption was some sort of average consumer goods cost which I assume includes these


And further on that note: All the "trinket" style items, toy cars, dolls, etc. are also essentially the same price as 20 years ago also due to super-cheap manufacturing now. So that probably plays into it as well.

[inflationhawk]

Video and Audio only accounts for a small overall percentage of the CPI, about 2%
http://myinflationrate.com/ItemCheckRes ... _code=SERA

Televisions are the big deflationary item and that only account for 0.2% of the CPI
http://myinflationrate.com/ItemCheckRes ... ode=SERA01

Here the most inflationary and deflationary items of the CPI:
http://myinflationrate.com/inflation_rate_rankings.php

[everything]

The money is slowly breaking loose right now, 30 year interest rate lows, it will trickle out into the economy, to quickly and inflation will rise faster, inflation is coming along quite nicely due to wage stagnation and the reality of the price of very slowly depleting energy, it's like with PM's, we go for the easy stuff first. It's also coming back in foreign investment in RE. Corporations are hoarding cash because they know that after the last big recession, when we get another one, they will need it. An old Keynesian theory is that dropping your interest rate real low like this will cause inflation later.
Government spending can't slow or big recession will occur, then jig is up. Interest rates can't go back up because spending will slow and bond debts are realistically no longer serviceable at higher rates. Also, the velocity thing, I don't think the government cares one way or another if they print, people declare bankruptcy in droves again, or if they have to keep bailing. It all creates tax revenues which keeps the can kickers going. The whole ponzi is based on growing the debt and either inflating it away or writing it off. It would seem with all this QE TPTB are trying like mad to get some inflation going but the reality is that they are battling deflation. Many Eastern countries are doing well growing their middle classes up as we once did, learning from our mistakes. We are in a slow decline, gold will hold it's own, to many countries are on to the currency collapse game, to the point of currency wars, silver may get beat down hard in another stiff recession, but just my opinion, if anything I said here contradicts, sorry.

[No82s]

Video games is what your basing your thinking on about inflation, LOL. Life is going to real interesting for everybody shortly.