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Stagflation wins. Will the MMT crowd tap out?

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November 30, 2010 – Comments (6)

The last refuge of the Inflation Deniers (Ok I admit it. I love that derogatory term. It's so versatile. Everyone is a Denier of something.) was that gold prices were a reflection of speculation fueled by the ease of gold investing via ETF's.  Gold prices, according to these repackaged Keynesians, were not high as a result of Federal Reserve counterfeiting... er... I mean, operations.  It's "animal spirits," if you reduce the lingo of Modern Monetary Theory to its Keynesian roots.  

Is There Any Evidence that GLD ETF Has Distorted the Price of Gold?

The answer is none. Zero. Zilch. Nada. In fact, the MMT crowd is starting to sound like conspiracy theorists. (You can almost write the rebuttal for them, can't you? It involves Glenn Beck and Doomsayers. Good God!  They are so predictable.)

In fact,

"if you take the dollar out of the equation, you just don't see anything weird going on with gold post-creation of the ETF, which you would expect if there were some new force creating a bubble in gold.

If anyone has any empirical evidence that the ETF has created a big distortion in the market -- rather than just conjecture -- we'd love to hear it." - Joe Wiesenthal, Business Insider

So the only shoe left to drop is Hedonic Regressions.

Commodities, the Producer Price Index, common sense, all point to higher prices year-over-year. Unemployment remains at least 9% (and probably double that.)

This is textbook stagflation. 

David in Qatar 

6 Comments – Post Your Own

#1) On November 30, 2010 at 1:25 PM, rofgile (99.32) wrote:

David:

 Gold price movements and Oil price movements are related during the last decade (especially last 3 years on your chart).

 To follow the language of your blog link ("we checked out gold in relation to copper and oil, two commodities that NOBODY thinks are strongly influenced by ETFs." - That's a big statement, can that be backed up?):  The price peak of oil during 2008 is now regarded by EVERYBODY as manipulation/speculation in the commodities markets.  (Right, otherwise why was oil worth $80, then $150/barrel and then only $30/barrel in just a year or so?)

 Funny that gold tracks identically with oil during the commodities speculation of 2008.

 That would seem to indicate that at least part of the movement in gold price is... speculation.

 -Rof
 

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#2) On November 30, 2010 at 1:31 PM, outoffocus (23.09) wrote:

Thank you for confirming what Binve, Sinchi, I, and a few others have been predicting for quite some time now.   Funny how I dont hear so many arguments between the inflationists and the deflationists anymore. I tried to tell them that they were both right but they never wanted to listen. 

I do think that there are other shoes that will drop besides hedonic regression.  The biggest ugliest shoe left to drop is the popping of bond bubble. I might want to move to mars when that happens. lol

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#3) On November 30, 2010 at 1:58 PM, outoffocus (23.09) wrote:

People focus on gold's trajectory over the past 2 years and call it a a bubble.  But if these same people looked at other commodity prices over the same period would they still call gold a bubble?  Lets take corn for example.  Just within the last 6 months corn has almost doubled in price.  Is that a bubble?  Many other commodities that we use for everyday life have gone up significantly in the past 6 months.  Are they all etf related bubbles?  Or could we really be experiencing commodity inflation?

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#4) On November 30, 2010 at 2:30 PM, whereaminow (20.23) wrote:

@rof,

Thanks for your thoughts. I'll try to respond more fully over the next few days.

@outoffocus,

Another interesting thing to note is that historically, price rises lag money creation by 18-30 months. That's an empirical guide that a lot of people on both sides of the debate ignored.  We are in that range now, and I think the rise in commodity prices are real and directly the result of excess of monetary creation.

David in Qatar 

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#5) On November 30, 2010 at 8:31 PM, rd80 (98.29) wrote:

From the this week's 'Pulse of the Economy' in Barron's, yoy increases.

CPI   1.2%
PPI   3.9%
JOC-ECRI Industrial Price Index*  23.5%

* "The Journal of Commerce-Economic Cycle Research Institute Industrial Price Index is a leading indicator of inflation rates. The index is based on prices of a broad assortment of raw materials used in industrial production." Source

Yep, no inflation.  Nothing to see, move along.

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#6) On December 06, 2010 at 3:05 PM, loverandfighter8 (< 20) wrote:

The U.S. will experience an inflationary depression before the end of this decade.  Forget about all the government propaganda and fake numbers like the CPI, etc., only the sheep believe those.  Join the Global Insurrection Against the Banking Occupation!!! Buy Silver!!! Crash JP Morgan!!!

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