Does the Fed's massive money printing mean inflation is about to soar? I'm not jumping on that bandwagon, but gold is still an attractive bet right now.
Last week's 26-year high in the price of sugar must have stuck in the craw of the deflationist camp, those who fear a bout of falling prices. And that's as good a segue as any to the inflation-vs.-deflation debate.
I've spilled plenty of ink on this important topic (for example, read "What's next: Inflation or deflation?"), and this week I'd like to turn to a friend of mine, Marc Faber, for his assessment.
How bad can inflation get?
I decided to quote liberally from Marc's report. But I encourage folks to read it in its entirety. (Here's the Gloom, Boom & Doom Web site; a subscription is required.) More from MSN MoneyRecession has ended, but pain hasn'tWhy are company insiders selling?The recovery puzzle's missing pieceWhy creating jobs is so hardWhat's next: Inflation or deflation?
For newer readers who continue to ask me to elaborate on this subject, hopefully Marc's commentary will bring them up to speed:
Deflation can be avoided through debt and money printing. This isn't to say that I support such policies, or that I find deflation to be "bad" and inflation to be "good." (Price stability is the most desirable condition.) But the point is that if a government is really determined to inflate its problems away, it can be done. Those people who believe in deflation have, however, some strong arguments. Their principal contention is that the economy is so weak (output gap) that the private sector's contraction cannot be offset by government spending and money printing.
In fact, the massive money printing and the rest of the stimulus are why gross domestic product has held up as well as it has. More from Marc:
The deflationist argues that, because we have a weak economy, we shall have deflation; an argument with which I would tend to agree in the very short term.Video on MSN Money Marc Faber on the risk of hyperinflationThe editor and publisher of the Gloom, Boom & Doom Report says there's a good chance for hyperinflation in the US.
I believe that in fact we have passed the point of maximum downside pressure. But more from Marc:
A true deflationist will also argue that because of deflation, economic conditions will worsen and, therefore, long-term U.S. government bond yields will decline. . . . But what happens to fiscal deficits and monetary policies under a scenario of a further decline in economic activity and a further collapse in asset prices? The answer is very simple. Deficits will increase further and more money will be printed. And the longer weakness in the economy prevails under the deflationary scenario, the more fiscal deficits will pile up and the more easy monetary policies will be pursued.
What the Federal Reserve does
Continued: The funding crisis
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So Bill's new pattern seems to be established. Say basically nothing, and plug some fellow prognosticator's newsletter, often blatantly. Most likely for a fat fee. (If Bill is so brilliant, why should he need such fees?)
sarcasm:
Gee, what a great value MSN readers are getting from articles like this.
/sarcasm
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