Steve's Place

[DeepBlue1]

Factors that could push future inflation further down the road and/or cause it to be more muted than current common knowledge would suggest...

BULLET POINTS:

Obama's alternative energy plans will help to keep oil prices low, and oil prices affect all other prices through transportation and manufacturing costs. This will keep inflation at bay for a VERY LONG TIME if not forever once it becomes a reality.

Obama's infrastructure plans will create jobs but will also encourage HUGE AMOUNTS of lending to construction companies and municipalities by the banks. This action will temporarily increase the liquidity and hence inflation, but will also enable the banks to pay back the $700 billion bailout package much sooner which will have the effect of REMOVING that same liquidity from the system relatively quickly.

The Fed has lowered interest rates to such a low level that increases will be very easy and will come quickly at the first signs of the economy "overheating" in what could be a rapid recovery once it gets some legs near the halfway point of 2009.

Overleveraging will not be allowed if the planned proper regulations and actual oversight and enforcement are instituted so that super fast hyper-growth will be unlikely to ever match the most recent binge of borrowing/buying.

Since silver is also an industrial commodity that will benefit from increased manufacturing in a growing economy, I think it will be a better investment than gold which seems to depend more heavily as a hedge against inflation rather than having any real value other than it's pretty in jewelry and is rare on the earth. This may be the time when the gold/silver ratio comes into play, although I suspect that during this period gold will come down as much as silver goes up to fill the gap in the ratio between the two.