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Minyan Mailbag: World Inflation

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Our world's biggest economies are now saddled with debt.

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Professor Succo,

This morning I had a couple of minutes to make some counts, since someone asked me what I thought was behind the Nikkei lift.

I told him that I thought the yen devaluation could explain most of the move but then I asked myself what this lift would be if measured relative to gold (sound money).

Now find below what the indexes have made since May, measured in gold terms:

Nikkei: +0.84% (completely deleted!!)
Dax: -2.96%
Nasdaq100: +1%
S&P500: -7.39% (ouch!!)

What I'm asking myself now is: since most of the advances in the world indexes can be explain as plain inflation, what could stop those indexes from going higher if gold keeps on going up?

Thanks, and have a nice day!

Minyan Enrico



Enrico,

As I have been "shrill" in saying, each of the world's major economies is now printing money willy nilly. As investors receive more and more cheap "money," it sloshes around and makes its way into asset prices.

Austrian economics prescribes that this is a recipe for disaster: as we know, this "reflation" engineered by our central banks is accompanied by debt. Our world's biggest economies are now saddled with debt, including our lenders like Japan!

What will stop it? Normally, inflation statistics would worry bonds, but since inflation is being hidden by corrupt statistics, this process is being delayed. Eventually, the markets will understand how corrupt they are; until then, other things may signal problems.

Earnings despite zero real interest rates are lackluster with many disappointments. Printing money only seems to work, but in reality it just makes over-capacity worse. We see problems in retail earnings like Gap (GPS) this morning.

-Succo

No positions in stocks mentioned.

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