Dollar vs. Gold In A Dual Inflation-Deflation Economy Part 2

Continued from Part 1

Deflation In Real Estate

Meanwhile, on the deflation side, we have real estate declining in price for four years and on the verge of falling further. Banks still aren’t lending and still aren’t marking to market the real value of their assets. Do people really believe that these assets are going to go back to their fantasy values of 2006 anytime soon? What would cause such an uptick in the economy? Is manufacturing improving? What are we building or making in the U.S. that anyone else in the world is buying? Real estate has the propensity to fall further or at best stay stagnant for years to come.

Baltic Dry Index Has Dried Up

The Baltic Dry Index provides some insight into the economy. Compare the Baltic Dry Index and the first chart below shows the current state of affairs while the second chart shows the pre-financial crisis glory years. The activity could be called the Dead Sea Index


Does this look like the chart of an economic recovery? Where is the activity that can support such recovery? Is less activity inflationary or deflationary? The activity is just not there. Why again is the DOW over 12,000? How again will any economic recovery take hold?

Unemployment Picture Improved

Some will point to Friday’s unemployment report showing the economy lost fewer jobs as a sign the recovery is in full force. To this I simply ask, “is your company hiring?” If it is, do you happen to work for a government related company?

Government’s, at taxpayer’s expense, can always hire more people for temporary work to build bridges, roads or implement a greener environment agenda. But these jobs come to an end once the project is finished. What will the employment picture look like moving forward? Lets not forget that there are still many folks who just aren’t counted in the unemployment statistics as they have been unemployed too long to even be counted. How can the stock market go up Thursday almost 200 points on anticipation of Friday’s better outlook? Ask Ben.

As I have mentioned in past articles, Bernanke and the Fed would have you believe that everything is ok. If your 401k is going up every month, just maybe you’ll think you are wealthier and go out and spend. And just maybe this spending will get businesses going again and they can hire more people. Then maybe, just maybe…we will get the economy on the right path and return to the glory years. Don’t count on it lasting. In fact, that’s what we’ve had the last few months. The consumer thinks all is well because quantitative easing has propped things up again. Consumer spending is up, but it is the consumer who always gets burned in the end. The smart consumer is hedging against the coming collapse by taking a position in gold and silver, not going out on shopping sprees.

Continue to Part 3

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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534


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