From time to time, I post something from my commercial blog, Kamaaina Loan blog, (the one I get paid to write although not by Monsanto) at RtO. Today is one of those times.
Kamaaina Loan blog is not meant to be controversial but I got a chance to take mild swipes at some of my favorite targets: inflation hawks and free market fanatics.
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At the Kamaaina Loan blog we have been following with amusement
and fascination the ups and downs of the gold price over the past few
weeks. One minute the price jumps to $1250 and a day or two later it’s
under $1200 and then back up again.
Sometimes the moves can be attributed to some pretty obvious doings
in the world economy, sometimes the leaps and slides seem practically
uncaused. But the price has gyrated around the $1225 that the gurus at
Goldman Sachs last year were predicting for this period.
But who anticipated that late last week the Japanese central bank
would decide to pump a lot of yen into the deflated Japanese economy,
the latest in a series of failed attempts to bring that sector out of
deflation? (Although the US Federal Reserve and many other wise heads
have been worrying for years about inflation, deflation is the big
problem. Economists know how to control inflation but — as the
experience of Japan over the past 25 years and of the whole world
economy in the ’30s demonstrated — deflation is the really intractable
The American stock market went crazy, with the Dow Jones Industrial
Average spiking to a record high. Just why the transfer of ownership of a
small fraction of Japanese equities from private (mostly Japanese)
hands to Japan government hands should make American stocks so much more
valuable is hard to figure.
But the effect on gold and its poor stepsister silver — once the
stock market had reacted — was in line with conventional thinking: both
fell off a cliff.
Gold got down to a four-year low and shortly before the market
reopened today buyers were offering a mere $1172. Silver cratered. It
has been a long while since it broke under $17. Today it is flirting