The Dollar Inflation and Gold

Above you see a partial list of real things that real people need on a daily basis. Prices having been going ballistic. This list does not include oil. We all know where the price of oil is. This list does not include education, health care, housing. We all know where the price of those things are.

None of those things are included in Government CPI data - which indicates there is no inflation at all. As Fed Governor William Dudley explained: The cost of your IPAD is going down. Awesome. Especially if your kid is an anorexic ADD techno-addict who miraculously never gets sick. And you are too. And your wife too. Though, then i don't know how you make money to buy your IPAD. I guess you can always borrow it.

For everyone else - not just in America but the whole world - the problem of expensive food and oil is serious enough to cause famine, death, riots and revolution. Look at Africa and the Middle East. If you don't think that is what the unrest is all about, you're not paying attention.

What does this have to do with a weak dollar? Everything. As all of these goods a priced in dollars. As the dollar weakens - by massive printing - more dollars keep chasing the same basket of food and oil. So the price rises. That simple.

If the dollar's so weak, how come in a crisis everyone wants dollars? They don't. The dollar rises during a crisis for the same reason the Yen rises. It's not because it's a haven of safety. It's because these currencies can be borrowed for free (no interest) and used to purchase interest bearing investments. In a crisis these Risk Trades mus be unwound, so the dollars and yens are repurchased and their value rises temporarily - vis a vis other currencies - not commodities.

What about gold? Gold is both a commodity and a currency. It rises as the dollar weakens. But it also rises as more dollars are printed - which means it can rise even if the dollar strengthens for technical reasons - for example during a crisis.

We are in a prolonged and worsening CRISIS. It is a debt crisis, and so far NO STEPS have been taken anywhere in the world to solve it. Spectacularly we are collectively trying to solve it be issuing more and more debt. Good luck with that.

Buy Gold.