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Taking a Stroll Down Memory Lane
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This week our government announced that inflation is very tame and only up .2%. The market cheered and stocks rallied. The stimulus checks are in the mail and the consumer is spending once again. Why some analysts are even recommending consumer discretionary stocks. Joy is beginning to return to Wall Street. But wait all you hopeful investors sitting on the sidelines waiting to buy into stocks as soon as a full recovery hits. Come take a quick stroll with me back into the seventies. Remember the Vietnam War and all the angst the country was going through during this period? How about gas lines? No sugar or other items out of stock on the grocery shelves? And then there was inflation. Up ten per cent one year and fifteen percent another. Life became unaffordable--fast. Some of the same government officials who are in the government now were also running the government back then. Do some history research into the Nixon administration and you'll see some of the same cast of characters that are making decisions today. They laid the groundwork for the problems that exploded during the Carter administration and those are the same problems that our next president will be facing in the next year. Gold is up over 300% in this decade. I'm wondering how much higher it will rise in the next decade. Oil is in the same situation along with most metals, agriculture and other commodities in general. There is a finite supply of resources and a huge demand for most of them. It is not a condition that will go away in a month or a year or two. It may take a decade or longer. Buy oil, buy gold, buy natural gas and companies that mine, drill, explore, or produce these commodities. It is the only way you can keep up with the raging inflation that we are on track to develop. Liquidity is rampant. The world needs to re-flate and it will do so in the form of gold. Participate or you will be left behind. And, yes, one day gold will drop but interest rates may be at 15% or mortgages at 11% or some other gosh awfully high number. When inflation gets up there, then it's time to sell your gold, oil, and other commodities because the economy will be on the verge of breaking. I remember because I was paying attention during the seventies. | ||
Comments (2)
Becky,
I susptect tht inflation is higher than reported, the bit about excluding food and fuel only goes so far. Things seem more expensive.
ADP, working off actual records of paychecks, just can't seem to make their employment figures agree with what the government puts out.
The spector of inflation does pose a challenge for investing. I will never be a gold bug but I do agree we as investors need to develop strategies to deal with inflation.
Posted by Thomas Armistead | May 15, 2008 9:36 PM
Becky,
How about Price Controls, gas rationing ( even / odd license plate "top-off" days and Temperature Control ( Businesses, offices, schools, government buildings were held criminally liable if their thermostats were set above the limit in heating season and below in cooling season - not that too many people has the luxury of air-conditioning at that time )
And of course Pres. Jimmy Carter's solution to the Energy Crisis - Cardigan Sweaters & indoor layered clothing.
The Inflation was actually kicked off when Social Security went bankrupt and the government just kept sending out the checks.
Solution : Raise Social Security With-holding Taxes and the upper income cut-off point - i.e. raise taxes on people in a distressed "depressed "economy while the unemployment rate skyrockets.
Some things never change [ sigh, Sigh ]
Here is TRUTH : INFLATION IS THE SOVEREIGN'S BANKRUPTCY.
In the "GOLDEN" ages the Kings diluted the gold in the coins == debasement.
We're more sophisticated now - we've got printing presses!
There was a Roman emperor that who was called " Old Red Nose " as he used copper to debase currency - as the coin got worn the nose was the first place to go copper red. I think our modern day politicians have red pinocchio noses !!!
Inflation is UnderReported for good reason - COLA ( Cost of Living Adjustments ) adjustments ) written into law for Social Security, Government & Mikitary Pensions among others including Union Contracts requiring pay-raises to achieve parity with Inflation, etc.
Remember the M's that Grenspan relied on so muxh - the Money Supply Indexes - M1. M2 & M3 ? They don't put them in the headlines anymore as they are not reported to the general public.
Wanna take a guess why not ? I belive the last general public news release on the M's was March of 2007.
Governments tell two kinds of lies - lies of COmission and lies of Omission. not So ?
Also, the Unemployment rate that Tom talked about. There are Six - U1 through U6. U3 is the headline number. Europe has higher unemployment rates because they report the functional equivalent of U6. The U.S. U6 is a little less than double U3.
U3 only reports people actually signed up for Unemployment Benefits and receiving them who are by definition seeking and "ready" to work. So-called " discouraged" or "frustrated " workers who give up looking for work just drop off the face of the earth.
Don Ferk ( fka VikingWarrior )
Did you know that the British Reggae band UB-40 met each other standing in an unemployment line ? UB-40 is the form you fill out to receive Unemployment Benefits in England.
Song O'da Day
( dedicated to DuffBeer being SLO-2 #1 )
RED RED WINE //// UB-40 1983
http://youtube.com/watch?v=Rg1iEBWxVeQ
http://youtube.com/watch?v=Rg1iEBWxVeQ
Posted by don ferk | May 17, 2008 7:03 PM