When governments get in trouble they inflate their currency or start shaving their coins. It’s a time-honored ruse, used at least since the days of the Roman Empire.
Today, we notice that $ price of Our Swiss Watch, which we weren’t going to, ahem, watch again, has jumped to almost USD 55. That means that the watch that cost USD 50 in 2010 now has jumped 10 percent, or about 5 percent a year.
So what, you say? Well, if you have a savings account (0.5 percent interest more or less) or Treasury bills, notes and bonds, also at minuscule interest rates, you are paying the government to hold your (pretend) money. You will, of course, be paying TAXES on the non-govt interest the banks are paying.
Lots of people in the U.S. think that inflation is just around the corner. Wrong. So far. See commentary on the Business Insider on this point. No general inflation yet, except for prices of government subsidized products. Those are skyrocketing: college education, medical care, medical/health insurance, etc. Gas prices have slipped again, but the govt just can’t get that housing bubble to re-inflate!!! One thing holding back the housing market is unemployment. Ignore the positive chirps from the media. It’s stubbornloy high: stable at 8+ percent.
The Fed has been pumping electrons marked, “I’m a dollar, accept me, please!” out of its computers for months and months. Known to the cognoscenti as QE. But there’s no place for those fake dollars to go except abroad or into the stock market. Lots of people, mainly union and private pension fund managers and individual investors, are happy.
You’ll continue to hear: Buy Gold! That’s the great inflation hedge!!! Wrong again. See Kitco.com or Jesse’s Cafe Americain from our Blog Roll for debunking charts of REAL prices. We are teetering on the knife-edge with no safe place to fall.