September 23, 2007

From today's Daily Reckoning

Money Supply Rates

Best analysis I've seen to date of the coming inflation

NIGHTMARE!!!

Take a look at the annual money-supply growth rates around the world –

US +12%
Euro zone +13%
Britain +14%
China +20%
Russia +51%
India +23%
S. Africa +22%
Brazil +12%

Now, you don’t have to be a NASA-scientist to figure out that as the quantity of money increases, each unit of money will continue to lose its value or purchasing power against assets whose supply cannot be increased at the same pace. This confiscation of purchasing power has bullish implications for precious metals.

Today, several highly-intelligent economists and analysts are anxiously waiting for “The Crash” which will wipe out the value of the Dow Jones by 50-60%, cut the value of gold by half, cause an economic depression and create a vicious bear-market in asset prices. In my humble opinion, these people are going to be disappointed because “The Crash” will be stealth and will take place via plummeting currencies rather than an outright collapse in nominal asset-prices. Those who are forecasting a significant decline in US asset prices need to look no further than Zimbabwe where stocks have been making record-highs, albeit in a collapsing currency! So, given a choice between an outright deflationary bust and an inflationary bail-out, I can assure you that every establishment will opt for the latter outcome. In fact, central banks will continue to print money until the world runs out of trees.


Editor’s Note: Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets. Money Matters is available by subscription from www.purusaxena.com

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