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The inflation thesis: seeing it and profiting from it



January 06, 2009 – Comments (1)

From a recent comment on djemonk's blog:

I remain certain that deflation will give way to inflation in a very short timeframe. After all, we're not seeing food deflation, whichis a reliable indicator of true inflation. Food was eliminated from "core inflation" for being volatile, which meant it went up a lot, and it was a reliable indicator for how devalued the currency was, other prices aside.

We have more currency than ever chasing the same amount of food (we eat more or less the same amount, or even less, during a recession), and if real deflation of the currency ever happens, we will see it show up in dropping food prices at some point. It won't happen, though.

Gold bubbles almost always happen in perfect conjunction with rapid inflation and other economic fears. That's because people like you (not perjorative) stop planning for the pretty bad and start planning for the extremely bad, because it starts looking more and more likely. And the girl in front of you at the grocery store buying the celeb rag (not just taking in the cover), who keeps up with what pets Paris Hilton has at the moment and whether or not Britney Spears has gotten extensions, reads in The Hollywood Star that you need to buy gold for more than just fashion reasons, so she gets into the act.

That's the gold bubble, and that's exactly what goldbugs are waiting for. That's when they sell. When the price appreciation of gold has far outstripped food inflation, to the point where gold looks overvalued to the trained eye, that's when the inflation hawks sell.

P.S. As I type this, the font size looks uniform across the whole post (and indeed, there's no way I can see to change the font size of any particular text), but in the preview, the font size is larger for the first and last paragraphs in the quotation section. 

1 Comments – Post Your Own

#1) On January 11, 2009 at 5:26 AM, falang1 (< 20) wrote:

Yes, your font size changes are freaking me out ;)  Please stop it.

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