Posted 02 September 2008 - 12:22 PM
I'd love to hear Jim Rogers remarks to these views. I know Rogers is a fundamentalist but I'm not sure anout his credentials to discuss monetary influences. I haven't finished listening to the prog yet but seems to me so far into BH's piece I agree with Ares that he pays no attention to the monetary inflation under the current fiat system when assessing the price increases of commodities so far.
Bob's point, as a market historian, is that what the CB's are trying to do have been done in the past.... with the same outcome; each time banks have tried to reflate, they have failed in preventing a deflationary bust.
I think it is more complicated this time. There will be a deflationary bust, with a temporary
strengthening of the dollar. But eventually the inner contradictions of the dollar/fiat, which we all know so well, will lead to the deflation of the dollar itself [inflation in prices].
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.
Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].