buffalonate (96.91)

Inflation IS Not Bad

April 26, 2011 – Comments (4)

Many people are pouring into gold and silver because they think that inflation is severe.  I believe that the inflation fear is being oversold.  The federal reserve has cpi at about 2.5% for this year.  There are many economists who prefer to follow the volcker method of inflation calucation.  They said that using updated methodologies they believe inflation is around 5%.  The Walmart CEO recently said that their company believes that inflation is around 5%.  Walmart should know what inflation is considering how huge a part of the economy they are.  Some people are also trying to say that food prices are out of control.  In 2010 food inflation was .8% the lowest amount of inflation since the 1960's.  This year the FDA is predicting inflation is between 3.5% and 4.5%.  http://www.bloomberg.com/news/2011-04-25/usda-retail-food-inflation-forecasts-for-2011-text-.html  There is obviously an inflation problem but it is not serious at this point. 

Some people also tell you that gold and silver are a great store of value.  The problem with that argument is gold is mostly used for speculation.  For example this morning silver prices dropped 5% on the fear that the federal reserve was meeting and they might raise interest rates.  That hardly seems like a safe store of value to me.  Some people think that the whole system is going to collapse and you have to own gold and silver as a store of value.  I think a basement full of canned food and guns is a more useful store of value.