Yesterday, Bill Bonner, the editor in chief of Agora Financial spoke his mind. He is never one to hold back - that's why I trust him. Yesterday in The Daily Reckoning he entitled his entry Inflate Your Debts Away. He was referring to what we are in the process of doing right here in the U.S. of A. As many Americans are alarmed, he is too. He says this about the stimulus overload:
People are living on food stamps and unemployment compensation. The feds control major industries. Banks are kept alive with tax money. And GDP ‘growth' was pushed up by boondoggles, bamboozles and bailouts.
But now, even the zombies are beginning to shuffle. They need more flesh...more blood...
In this regard, Federal Reserve Governor Bullard has let the cat out of the bag. He says the best remedy at this stage would be further doses of quantitative easing. He's right - at least within the strange context of central banker thinking. If your goal is to get the zombies moving...you need to give them some juice. And when you've already cut your rates to zero (the current rate is actually 0.25%), and you've run a deficit of $1.5 trillion, what else can you do? You've got to print money, right?
There are some very smart people who believe inflation rates are going up - soon. They're urging investors to dump the dollar and US bonds. Their logic is very clean and very solid:
The US government owes more than it can pay. When a debt cannot be paid by the borrower, someone else must pay. Typically, it's the lender who pays when the borrower defaults. But the US government doesn't have to default. It has another alternative, the aforementioned quantitative easing - monetary inflation, in other words. Instead of defaulting on its debts directly, the federal government can inflate them away.
Bill has a sharp mind - this is unique wisdom that you can read here. You have seen me write about this before. Governments do not know when to stop printing! Ownership of physical gold is your preservation of capital in an uncertain time. Lately, the talk is of deflation. REMEMBER that periods of hyperinflation are always preceded by hyperinflation! Gold as investment today speaks volumes! A golden coin - peace of mind!