"Canadian apologists say weakness is overstated and temporary. I say it's understated because few realize what is happening and how serious this is. Global stimulus has faded. It's gone. Kaput. And that stimulus was the only thing holding this global economy together. Strip out government spending, QE madness in the
What I do think is worth adding is that if the economy rolls over then asset prices will roll over as well. That includes real estate right along with the buying power of your pension, 401k, and annuity. Government is already trying to raise the tax rate because the falling asset values are reducing tax revenues. Government has no problem collecting more taxes on inflated real estate valuations but is not so happy when values deflate (which of course leads them to change the rules while sleepy sheeple just sit and watch). Metals could be affected downward in dollar terms as deflation sets in as well but I maintain that the buying power of gold (as opposed to the dollar denominated price) will remain intact because it has done so for thousands of years. In other words, if gold tanks in dollar terms then so will the price of food, energy and everything else.
In my own financial planning I focus very little on the dollar value of gold and I expect it to vary greatly as the economy works through all of the credit based abuses that have occurred since we left the gold standard in 1971. Still, for those who plan to sit and wait for the dollar cost of gold to fall because of deflation, it is far from guaranteed that gold will fall in a deflationary crash. Gold is not really a hedge against inflation but rather a hedge against government dishonesty. If Bernanke opens up the QE spigot again (a clearly dishonest thing to do) then gold will go up rapidly in dollar terms IMO, probably far more rapidly than would otherwise be indicated by the amount of money printing he is actually doing. This is because the dollar is already worthless and if people become convinced that the Zimbabwe-like printing will continue without end then there will be a mad rush to get out of the dollar and into real money. Note: this would not be happening as much due to fear of the government printing presses as much as fear that one's fellow citizens might beat you to the door leaving you holding an empty bag. Mish thinks more U.S. stimulus is not going to happen but I'm not nearly as convinced as he seems to be.
Mish does say one thing that I think is very true: few people really understand what a stinking ball of crap the global economy actually is. It is a house of cards waiting for a stiff wind. Nothing says a stiff wind must absolutely occur but it would be foolish to assume that a stiff wind will certainly not happen. There are people out there with vested interests in a collapse who are doing the economic equivalent of aiming financial fans at the house of cards. Perhaps the big players are not panicking yet because they all have "insurance" against catastrophic collapse in the form of credit default swaps. In fact, I assume this is exactly what is happening given that nearly 1.5 quadrillion worth of these over the counter deals are currently in play. People are paying lots of insurance premiums in order to buy this much insurance but they are idiots because if the stiff wind does happen it will blow away the derivatives market along with everything else. It was, in fact, credit default swaps gone wrong that bankrupted AIG. No insurance policy is worth the paper it is written on if everyone is trying to collect on claims at the same time.
