torsdag 18 augusti 2011


I’ve built all of this into my reasoning for thinking that gold is entering an irrational bubble. And I believe one of the primary drivers of this inevitable bubble is this misconception that the USA and the Federal Reserve are the primary causes of inflation and gold prices. The reason the hyperinflation theory in the USA has been so wrong (aside from misunderstanding how the modern monetary system works) is because the hyperinflationists have misunderstood the actual cause of their inflation worries. They’ve no doubt been right (in terms of gold), but they’ve been right for the wrong reasons. In my opinion, it is not the “central planning” of the USA that is causing this fear trade. Rather, the true fundamental driver is the Central Bank of China.

The key for investors will be understanding the point where the gold market reaches disequilibrium based on these misconceptions (the Euro crisis and the Fed contribute significantly to this misconception) and undergoes the inevitable collapse that always follows a bubble. I personally don’t think we’re there yet. In the meantime, when someone points to the Fed, the US government and their “central planning” or “money printing” as the primary cause of the surge in the price of gold and justification of their USA hyperinflation theory, you might do them a favor and let them know that they’re right about the flaws of “central planning” and excessive “money printing”. You just might want to also let them know that they’re focusing on the wrong central bank.

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