Dr. Glance,
I've heard the inflation debate going on for quite some time now. I've gone back and forth...inflation or deflation? We're obviously not experiencing inflation except as is relates to oil mainly.
However, the side I lean towards is hyper-inflation. Why? It's in the best interest of the US government. If we enter into a hyper-inflationary environment, the government will be able to pay the interest on the debt much more easily with cheap dollars. Also, I wouldn't put it past them to get us involved in a MAJOR war with the intention of canceling their debt to countries like China and other investors in bonds and treasuries. What a deal, eh?
We already experienced an economic collapse back in March, 2009. This bull market is propelled ONLY by stimulus money. When we experience the next economic collapse (this year or next in my opinion), the tax revenues for the government will fall even more dramatically. When this happens, the gov. has 2 choices:
1. Default on debt (like greece)
2. Print dollars (massive)
They will almost certainly print massive dollars, which is a choice not available to Greece (they can't print Euros).
We're not seeing inflation right now because the money supply is shrinking just as fast as they print money. Also, consumer spending is way down and the baby boomers' spending patterns have reached a crescendo because they're entering into the years where they typically conserve and cut back spending.
Historically, gold and the dollar have always been at odds. In my opinion, this bull market in gold will continue. Why? Because it's the ultimate safe haven for investors. The dollar is strengthening relative to other currencies because it's still viewed (for some strange reason) as a safe haven in times of uncertainty. However, gold is STILL moving up in strength relative to the dollar. Gold is strong in ALL currencies, and I believe it'll remain that way over the long term (with short and intermediate term corrections). When investors have nowhere to turn, they ALWAYS turn to gold.
With the facts I've been able to gather, I believe gold is the place to be. I believe we'll be entering into a hyper-inflationary depression sometime within the next 6 months to 2 years with the only one thing possibly causing a delay is the governments ability to juggle the ball. My money is on gold over the long haul.
