Dow plummets 500+ points, Nasdaq down over 5%

• BoatShoes

  Manhattan Buckeye;858217 wrote:"Inflation and rate hikes are right around the corner!! "
  
  Obviously rate hikes aren't, Bernanke pretty much jammed us into a 2 year hitch.
  
  "We can borrow money for free and put people to work who would otherwise be doing nothing and fix what the real problem is...lack of growth "
  
  An excellent plan, we'll tell our Chinese friends to lend us money to pay 50% of the unemployed to dig holes and the other 50% to fill them back up.
  
  I have a suggestion for you Boatshoes, apply to take Summers' or Romer's ex-position, our economic-incompetent in chief could use a sycophant like you.

  
  Sycophant? Well that's not very nice. Can't we be friends?
• Cleveland Buck

  

  BoatShoes;862891 wrote:Christina Romer making too much sense...now if only Barry would stop trying to appease the unreasonable who will repudiate him no matter what.
  
  http://www.nytimes.com/2011/08/14/business/economy/from-world-war-ii-economic-lessons-for-today.html?_r=2&pagewanted=print&pagewanted=all
  
  "AFTER the grim economic developments of the last few weeks, it’s easy to lose hope. Could the Great Recession of 2008 drag on for years, just as the Great Depression did in the 1930s? Adding to the despair is the oft-repeated notion that it took World War II to end the economic nightmare of the ’30s: If a global war was needed to return the economy to full employment then, what is going to save us today?
  
  Look more closely at history and you’ll see that the truth is much more complicated — and less gloomy. While the war helped the recovery from the Depression, the economy was improving long before military spending increased. More fundamentally, the wrenching wartime experience provides a message of hope for our troubled economy today: we have the tools to deal with our problems, if only policy makers will use them.
  
  As I showed in an academic paper years ago, the war first affected the economy through monetary developments. Starting in the mid-1930s, Hitler’s aggression caused capital flight from Europe. People wanted to invest somewhere safer — particularly in the United States. Under the gold standard of that time, the flight to safety caused large gold flows to America. The Treasury Department under President Franklin D. Roosevelt used that inflow to increase the money supply.
  
  The result was an aggressive monetary expansion that effectively ended deflation. Real borrowing costs decreased and interest-sensitive spending rose rapidly. The economy responded strongly. From 1933 to 1937, real gross domestic product grew at an annual rate of almost 10 percent, and unemployment fell from 25 percent to 14. To put that in perspective, G.D.P. growth has averaged just 2.5 percent in the current recovery, and unemployment has barely budged.
  
  There is clearly a lesson for modern policy makers. Monetary expansion was very effective in the mid-1930s, even though nominal interest rates were near zero, as they are today. The Federal Reserve’s policy statement last week provided tantalizing hints that it may be taking this lesson to heart and using its available tools more aggressively in coming months.
  
  One reason the Depression dragged on so long was that the rapid recovery of the mid-1930s was interrupted by a second severe recession in late 1937. Though many factors had a role in the “recession within a recession,” monetary and fiscal policy retrenchment were central. In monetary policy, the Fed doubled bank reserve requirements and the Treasury stopped monetizing the gold inflow. In fiscal policy, the federal budget swung sharply, from a stimulative deficit of 3.8 percent of G.D.P. in 1936 to a small surplus in 1937.
  
  The lesson here is to beware of withdrawing policy support too soon. A switch to contractionary policy before the economy is fully recovered can cause the economy to decline again. Such a downturn may be particularly large when an economy is still traumatized from an earlier crisis.
  
  The recent downgrade of American government debt by Standard & Poor’s makes this point especially crucial. It would be a mistake to respond by reducing the deficit more sharply in the near term. That would almost surely condemn us to a repeat of the 1937 downturn. And higher unemployment would make it all that much harder to get the deficit under control.
  
  Military spending didn’t begin to rise substantially until late 1940. Once it did, fiscal policy had an expansionary impact. Some economists argue that the effect wasn’t very large, as real government purchases (in 2005 dollars) rose by $1.4 billion from 1940 to 1944, while real G.D.P. rose only $0.9 billion.
  
  But this calculation misses two crucial facts: Taxes increased sharply, and the government took many actions to decrease private consumption, like instituting rationing and admonishing people to save. That output soared despite these factors suggests that increases in government spending had a powerful stimulative effect. Consistent with that, private nonfarm employment — which excludes active military personnel — rose by almost eight million from 1940 to 1944.
  
  The lesson here is that fiscal stimulus can help a depressed economy recover — an idea supported by new studies of the 2009 stimulus package. Additional short-run tax cuts or increases in government investment would help deal with our unemployment crisis.
  
  What of the idea that monetary and fiscal policy can do little if unemployment is caused by structural factors, like a mismatch between workers’ skills and available jobs? As I discussed in a previous column, such factors are probably small today.
  
  But World War II has something to tell us here, too. Because nearly 10 million men of prime working age were drafted into the military, there was a huge skills gap between the jobs that needed to be done on the home front and the remaining work force. Yet businesses and workers found a way to get the job done. Factories simplified production methods and housewives learned to rivet.
  
  Here the lesson is that demand is crucial — and that jobs don’t go unfilled for long. If jobs were widely available today, unemployed workers would quickly find a way to acquire needed skills or move to where the jobs were located.
  
  Finally, what about the national debt? Given the recent debt downgrade, it might seem impossible for the United States to embark on fiscal stimulus that would increase its ratio of debt to G.D.P.
  
  Well, at the end of World War II, that ratio hit 109 percent — one and a half times as high as it is now. Yet this had no obvious adverse consequences for growth or our ability to borrow.
  
  This isn’t hard to explain. Everyone understood then why the nation was racking up so much debt: we were fighting for survival, and for the survival of our allies. No one doubted that we would repay our debts. We had done it after every other war, and raising taxes even before the attack on Pearl Harbor showed our leaders’ fiscal resolve.
  
  Today, we can do much more to aid recovery, including a near-term increase in our debt. But we need to make the reasons clear and make concrete our commitment to deal with the debt over time.
  
  In place of the tepid budget agreement now in place, we could pass a bold plan with more short-run spending increases and tax cuts, coupled with much more serious, phased-in deficit reduction. By necessity, the plan would tackle entitlement reform and gradually raise tax revenue. This would be the World War II approach to our problems.
  
  Equally important, someone needs to explain to the nation and to world markets just why we must increase the debt in the short run. Unemployment of roughly 9 percent for 28 months and counting is a national emergency. We must fight it with the same passion and commitment we have brought to military emergencies in our past."
  
  
  Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.
  
  
  It's funny I'm reminded by how often Writerbuckeye posts "those who fail to learn from history..."

  
  Inflationary money is what caused the Great Depression in the first place. After the market crashed in 1929, Hoover and the Fed did everything they could to continue inflating, but the market was fed up. There was no demand for the new weak dollars. Every inflationary boom is followed by a bust that is needed to correct the market from malinvestment and bring prices back down to where they are supposed to be. All FDR did when he took us off the gold standard in 1933 was to start to reinflate the bubble as much as could before it burst again in 1937. Obviously government spending didn't stimulate the economy or it would have continued to grow when the spending stopped. That is the definition of stimulate. The government spending replaced the economy, so when spending had to be cut, the economy suffered. All that mess and 15 years of suffering when the recession would have been over in a year or two if the government had stayed out of it and let the money supply contract and prices and wages deflate to the proper level.
• QuakerOats

  believer;861885 wrote:True. Obama is easily the most business-friendly, pro-free market POTUS in my lifetime. BHO makes Reagan seem like Karl Marx.

  
  No doubt about it; his NLRB is only yanking the chain of business owners; they are not really serious about tilting the union election rules about 180 degrees in favor of big labor. And certainly his EPA is scaling back plans relative to climate change rulemaking and coal-fired powered plants, heck that was all just a joke. And as far as appointing communists like Van Jones and others to high-level positions, that was all done just to see if the public was paying attention. And his $4 trillion in additional debt is really just trivial, the 50% who pay no taxes currently are going to get a bill next year. Of course, obamacare is nothing like government expansion and anyone who thinks that doesn't understand cbo projections. And when it comes to taxes he is advocating cuts of all kinds - capital gains, corporate income tax, marginal rates, and the extension of all loopholes that help companies retain employees. He is even talking about a one-year moratorium on taxing all billionaires and millionaires because they have been unfairly carrying the burden of the vastly progessive income tax structure currently in place. Also jet owners will get a subsidy to offset higher costs for having to pay more for a jet because they can only be built in Washington state with union labor ----- he was really pissed when he found out about that situation. Lastly, Kasich, Walker and Christie were the indirect beneficiaries of his staunch support of the public sector union reform legislation which passed in their states; what a bold move on his part to support the sometimes controversial side of good/accountable government. It's funny, he seems to be making Reagan look like FDR. Oh, and it's nice to see him at Mass every Sunday.
• believer

  

  QuakerOats;863153 wrote:Oh, and it's nice to see him at Mass every Sunday.

  Yes that is heartwarming. As long as the priest shrouds the crucifix, it doesn't insult his Muslim faith.
• Abe Vigoda

  

  believer;863208 wrote:Yes that is heartwarming. As long as the priest shrouds the crucifix, it doesn't insult his Muslim faith.

  
  Nor his Kenyon birthplace
• Footwedge

  Boat....with all due respects....the GDP and deflationary pressure was so intense...in 1932....even a shiddy economy would have to grow a little, don't you think? And yes, Keynesian economic policies were implemented....successfully I might add. Roosevelt got cold feet in 1937, and called off the spending dogs....due to the fear of too much debt. But there comes a time and a place when the economic "immune system intolerance factor" to such tactics begins to kick in.
  
  You print money, expand the government...print more money....expand the government some more....and keep the taxes low and the interest rates lower than whale poo.......and nothing is stimulated. Why?
  
  Saturating the market with cheaper dollars is not working today. The macroeconomic worldwide woes cannot be cured by traditionary fiscal and monetary policies.
• believer

  

  Footwedge;872742 wrote:And yes, Keynesian economic policies were implemented....successfully I might add. Roosevelt got cold feet in 1937, and called off the spending dogs....due to the fear of too much debt.

  While I generally agree with most of your comments, I beg to differ on this one. FDR's Keynesian policies were temporarily "successful" because for a very brief time, it put unemployed men (in particular) back to work. It produced a few nice public parks and a couple of hydroelectric dams in Tennessee Valley, but it did not grow the economy.
  
  Fortunately for FDR, Churchill asked for loads of American-made help and the Japanese attacked Pearl Harbor....all just in time to bail him out of his shaky "Big Government is better gubmint" policies.
• BoatShoes

  Footwedge;872742 wrote:Boat....with all due respects....the GDP and deflationary pressure was so intense...in 1932....even a shiddy economy would have to grow a little, don't you think? And yes, Keynesian economic policies were implemented....successfully I might add. Roosevelt got cold feet in 1937, and called off the spending dogs....due to the fear of too much debt. But there comes a time and a place when the economic "immune system intolerance factor" to such tactics begins to kick in.
  
  You print money, expand the government...print more money....expand the government some more....and keep the taxes low and the interest rates lower than whale poo.......and nothing is stimulated. Why?
  
  Saturating the market with cheaper dollars is not working today. The macroeconomic worldwide woes cannot be cured by traditionary fiscal and monetary policies.

  Indeed Monetary Policy is not working and should not be expected to work if we'd just remember Japan in the 90's!
  
  
  
  And what did FDR's decision to go for austerity in 1937 do??? It persisted the great depression. If Hitler hadn't have come to power he would have left as a failed President and a disgrace and we wouldn't have learned how the government can end a depressed economy. (Not that it matters because we haven't paid attention).
  
  But of course Cleveland Buck erroneously claims, just as we're experiencing what Japan did in the 90's and what we experienced in the 30's is that "the money hasn't flooded the marker yet and inflation's around the corner though I'm telling you."
  
  But the evidence does not support that proposition! Here's the Japan's Inflation post Quantitative Easing.
  
  
  That's Right! There was Deflation! And about all Uncle Ben can do now is try and hold that off...but he has no real tools to get the economy going again. Uncle Ben's best bet at Jackson Hole would be to say, "Stop being stupid Congress and use this opportunity to literally borrow money for free and put people to work fixing our decaying infrastructure."
  
  And another thing...Cleveland Buck will say "You're not considering the right kind of inflation...headline inflation including commodity prices is really high!" But the St. Louis Fed recently debunked (again) the notion that monetary policy should consider headline inflation as it tracks core inflation.
  
  
  
  And it begs the question as to why we're so afraid of inflation anyway? News flash...Americans do not save and are saddled with debt. Inflation averaged 5.6% during the Reagan years and it helped pay down the huge debt that he racked up. Cleveland Buck decries our huge debt and deficit meanwhile inflation approaching anything near the level we had during the Reagan years would help eliminate that burden better than anything else on the plate. As wages and prices rise, the value of existing debt erodes. Consumers, businesses and governments are liberated to spend more freely. Additionally, higher inflation effectively amounts to a wealth transfer from creditors to debtors...including all those banks that Cleveland Buck decries and who the tax payer bailed out for nothing in return. It would return the money to the taxpayer from those banks we bailed out as they pay of this overhanging debt with cheaper dollars. That is unfair to the banks to be sure but it is not as unfair as all the students and homeowners defaulting on their debts completely and not paying back anything at all as they have no jobs and are burdened with debt they cannot repay. Cleveland Buck's solution of "let prices and wages deflate" would make what he says is our largest problem...our debt....exponentially worse. It's like Doctor's bleeding patients!
  
  Americans need to change their behavior and we need to get back to more sound public and private spending. We need to fix our long term entitlement and spending problems but we cannot do that until we get out of this crisis...and that's what it is...it's a human catastrophe and we know the remedy...it worked in the past and put america on the path to the largest increase in the middle class in history and that is a fiscal stimulus.
• BoatShoes

  believer;873258 wrote:While I generally agree with most of your comments, I beg to differ on this one. FDR's Keynesian policies were temporarily "successful" because for a very brief time, it put unemployed men (in particular) back to work. It produced a few nice public parks and a couple of hydroelectric dams in Tennessee Valley, but it did not grow the economy.
  
  Fortunately for FDR, Churchill asked for loads of American-made help and the Japanese attacked Pearl Harbor....all just in time to bail him out of his shaky "Big Government is better gubmint" policies.

  What do you not understand? The WWII type stimulus should have been done in 1932 and FDR should not have gone austerity (just like BHO and Congress are doing now) in 1937. WWII was a giant government spending program. Just imagine if we would do that as nation building things and improving our world rather than destroying it. Your claim is inherently contradictory here my friend. What killed FDR was not going far enough, just like BHO.
  
  Perhaps there is something to be said about appealing to conservative convictions to get the kind of fiscal stimulus we need. Writerbuckeye mentioned hiring people to round up illegals and deport. Great idea! And, we'll build a massive impenetrable great wall of America on the Mexican Border armed with missiles and and machine guns too! We can also build some new ships to patrol the gulf of Mexico looking for illegal scum! Additionally, we can build new Gay reformation prisons in each County so that we could teach teh gays to be straight. And furthermore, we'll start building new school structures that we can sell to private firms so that way more students can get vouchers to go to private schools and will build more refineries to lower the price of crude which we'll sell off to the public. And, for good measure we can drop some bombs on Iran. Now that would put America back to work and what's a conservative not to like??? When deficit spending is needed, propose something morally foreboding and Republicans forget any concern they had about deficit spending while their genitals harden. Propose it Barry!
• jhay78

  

  One man's opinion on the difference between the post WWII economy and today's economy:
  
  http://www.nationalreview.com/articles/275361/false-wwii-analogy-victor-davis-hanson?page=1
  
  Basically, the situation post WWII was more ideal for America to tackle its debt problem, while today social spending and entitlements take up so much of the federal budget. I don't pretend to be an expert on these things, I just found the comparisons between 1946 and now compelling.
  

  Moreover, the world abroad in 1946 was hardly similar to the world in 2011. Review the prior status of our present global competitors: India was a backward colony and in civil turmoil. War-torn China was about to embark on the most self-destructive social experiment in human history. Two-thirds of a centrally planned Soviet Union was in shambles. Western Europe was near starving after years of bombing and Nazi strangulation. The future export powerhouses of Japan and Germany were in ruins. Brazil was pre-modern. The miracles of Hong Kong, Singapore, Taiwan, and South Korea were still imaginary. A victorious Britain was full of self-doubt and exhausted, busy dismantling its colonial empire and nationalizing its steel, transportation, health, and energy industries.
  In the immediate postwar years, only a capitalist, self-confident America was poised to supply foreigners with much-needed manufactured goods, expertise, and capital to raise the world from ruin. And from the profits, we were able to pay down our own staggering and unsupportable wartime-incurred debt. Note as well that in 1946 a self-sufficient oil-producing America was not guzzling down a half-trillion dollars’ worth of imported oil each year. In short, in 2011 there is nothing that suggests the present massive borrowing will lead us to anything like the prosperity of the postwar years — a time when social spending and entitlements accounted for 30 percent, not 70 percent of the annual federal budget; when households both had cash and were eager to buy long-denied items; when America did not import high-cost oil (having recently supplied 80 percent of its wartime allies’ oil needs from domestic production); and when an unscathed industrial-powerhouse United States was alone on top of the world

• QuakerOats

  "In short, in 2011 there is nothing that suggests the present massive borrowing will lead us to anything like the prosperity of the postwar years — a time when social spending and entitlements accounted for 30 percent, not 70 percent of the annual federal budget;"
  
  
  BINGO --- especially when less than half the citizens are paying the tab in which 70% of the budget is being sucked up by people .... not paying any of the tab.
• Cleveland Buck

  

  BoatShoes;874229 wrote:Indeed Monetary Policy is not working and should not be expected to work if we'd just remember Japan in the 90's!
  
  
  
  And what did FDR's decision to go for austerity in 1937 do??? It persisted the great depression. If Hitler hadn't have come to power he would have left as a failed President and a disgrace and we wouldn't have learned how the government can end a depressed economy. (Not that it matters because we haven't paid attention).
  
  But of course Cleveland Buck erroneously claims, just as we're experiencing what Japan did in the 90's and what we experienced in the 30's is that "the money hasn't flooded the marker yet and inflation's around the corner though I'm telling you."
  
  But the evidence does not support that proposition! Here's the Japan's Inflation post Quantitative Easing.
  
  
  That's Right! There was Deflation! And about all Uncle Ben can do now is try and hold that off...but he has no real tools to get the economy going again. Uncle Ben's best bet at Jackson Hole would be to say, "Stop being stupid Congress and use this opportunity to literally borrow money for free and put people to work fixing our decaying infrastructure."
  
  And another thing...Cleveland Buck will say "You're not considering the right kind of inflation...headline inflation including commodity prices is really high!" But the St. Louis Fed recently debunked (again) the notion that monetary policy should consider headline inflation as it tracks core inflation.
  
  
  
  And it begs the question as to why we're so afraid of inflation anyway? News flash...Americans do not save and are saddled with debt. Inflation averaged 5.6% during the Reagan years and it helped pay down the huge debt that he racked up. Cleveland Buck decries our huge debt and deficit meanwhile inflation approaching anything near the level we had during the Reagan years would help eliminate that burden better than anything else on the plate. As wages and prices rise, the value of existing debt erodes. Consumers, businesses and governments are liberated to spend more freely. Additionally, higher inflation effectively amounts to a wealth transfer from creditors to debtors...including all those banks that Cleveland Buck decries and who the tax payer bailed out for nothing in return. It would return the money to the taxpayer from those banks we bailed out as they pay of this overhanging debt with cheaper dollars. That is unfair to the banks to be sure but it is not as unfair as all the students and homeowners defaulting on their debts completely and not paying back anything at all as they have no jobs and are burdened with debt they cannot repay. Cleveland Buck's solution of "let prices and wages deflate" would make what he says is our largest problem...our debt....exponentially worse. It's like Doctor's bleeding patients!
  
  Americans need to change their behavior and we need to get back to more sound public and private spending. We need to fix our long term entitlement and spending problems but we cannot do that until we get out of this crisis...and that's what it is...it's a human catastrophe and we know the remedy...it worked in the past and put america on the path to the largest increase in the middle class in history and that is a fiscal stimulus.

  Inflation is higher today than during the Reagan years, the government just calculates the CPI differently now so that number doesn't scare people.
  
  What worked to get us out of the Great Depression was destroying every other industrialized country in the world leaving only us to rebuild it. If we tried spending like that now you would just hyperinflate us into Weimar Germany.
  
  You say people should save more, why do you think they don't save? Prices are higher so they have less money to save, and the money they do save is worth less and less every year. Why would they save if they could? Deflation encourages saving and is the reason economies bounce back from their inflation driven booms and busts. When people save money the Federal Reserve doesn't have to print capital out of thin air, it is already there for business to invest.
  
  I don't understand anyone can be in favor of inflation except for big government and big banking. Price inflation soaks the poor and middle class and transfers that money to the rich. Why do you think the disparity in wealth distribution is so high today?
  
  Deflation sucks for people with debt, and most people live on debt right now, so that is why people are so afraid of deflation. These people are insolvent just like our government and our banks. How sustainable do you think it is to keep printing dollars and driving up prices on the poor and middle class? How long can they live on credit cards? You are suggesting we should manipulate the economy to prop up the bankrupt consumer just like we prop up the bankrupt banks, which is only fair, but both will end in disaster. They all need to be allowed to fail before we can have real savings and therefore growth again. You Keynesians see things so short term that you don't understand the consequences of your actions. Sure the Fed and the government might fuck around and stumble on a huge new bubble that will give us some more false growth for the next 5 or 10 years and we will be right back here again when that bubble bursts, only we will have more debt and a weaker dollar to deal with.
  
  
  
• Footwedge

  The CPI has gone up 540% since I graduated high school in 1972. In my first "real job", my monthly salary was $750 plus about $250 in annual company profit sharing. In today's dollars, that would equate to roughly 64K annually. Not too bad...especially considering I hadn't as of yet graduated from college. That came 3 years later, in which case I got a nice raise...and was making 15K annually...which equated to about 76K in today's dollars.
  
  Last year, Footwedge Jr. graduated from college...and landed a job for 47K a year. And he was one of the lucky ones. Over the course of my adult lifetime, our country has gone down the economic shidder.
• believer

  

  Footwedge;884168 wrote:The CPI has gone up 540% since I graduated high school in 1972. In my first "real job", my monthly salary was $750 plus about $250 in annual company profit sharing. In today's dollars, that would equate to roughly 64K annually. Not too bad...especially considering I hadn't as of yet graduated from college. That came 3 years later, in which case I got a nice raise...and was making 15K annually...which equated to about 76K in today's dollars.
  
  Last year, Footwedge Jr. graduated from college...and landed a job for 47K a year. And he was one of the lucky ones. Over the course of my adult lifetime, our country has gone down the economic shidder.

  My first real job right out of high school was the United States Army in 1975. Made an impressive $342 a month. My first job out of college in 1983 paid $14,000 a year. To be honest $14,000 a year in 1983 was nowhere close to equating to 60K a year in today's dollars. Figuring a generous average inflation rate of 3% a year that would equate to about $32,000 a year in today's dollars.
  
  If your son is starting at 47K a year, I'd say he's doing OK at entry-level.
  
  But I still see your point...we have taken a few steps back economically.
• Footwedge

  believer;884314 wrote:My first real job right out of high school was the United States Army in 1975. Made an impressive $342 a month. My first job out of college in 1983 paid $14,000 a year. To be honest $14,000 a year in 1983 was no where close to equating to 60K a year in today's dollars. Figuring a generous average inflation rate of 3% a year that would equate to about $32,000 a year in today's dollars.
  
  If your son is starting at 47K a year, I'd say he's doing OK at entry-level.
  
  But I still see your point...we have taken a few steps back economically.

  Plug in 12K per year in 1972....Voila....65K. I will admit though that I did not start my first real job until 1974. So the actual number equivelent is 55K...not 65K.
  
  http://146.142.4.24/cgi-bin/cpicalc.pl?cost1=12000&year1=1972&year2=2011
• Manhattan Buckeye

  Likely won't be a good day today, two days of hangover from horrible (Monday) to mediocre (today) Asian/Euro markets.
• gut

  Gold is a good enough "store of value", vs. putting money under your mattress. More so in today's 0 rate environments, but unless you intend to speculate CD's, treasuries and the stock market have historically been better places for your money.
  
  If you're money is just sitting there, for the long-term, then why not? And my next question would be why is your money "just sitting there"?
  
  Gold is in a speculative bubble right now, and we've seen this before. Enjoy it while it lasts, just don't get caught standing without a chair when the music stops.
• Cleveland Buck

  

  gut;884772 wrote:Gold is a good enough "store of value", vs. putting money under your mattress. More so in today's 0 rate environments, but unless you intend to speculate CD's, treasuries and the stock market have historically been better places for your money.
  
  If you're money is just sitting there, for the long-term, then why not? And my next question would be why is your money "just sitting there"?
  
  Gold is in a speculative bubble right now, and we've seen this before. Enjoy it while it lasts, just don't get caught standing without a chair when the music stops.

  A speculative bubble is when prices go up for no apparent reason. There is good reason why gold is going up, because it is the only currency that isn't printed out of thin air. People want something that will hold value rather than be printed into oblivion. If the Fed raises interest rates and tightens credit and gold continues to go up, then you have a speculative bubble that will eventually burst.
  
  The real bubble right now is Treasury bills. There is zero reason for anyone to buy Treasuries at negative real rates, especially when we are issuing so many of them to pay for the massive debt. Buyers get 2% interest but those dollars lose 10% of their value each year, so why do it? When that bubble bursts, no one will have a chair to sit on, so you better hope you have something other than worthless dollars to land on when you fall.
• gut

  Cleveland Buck;884837 wrote:A speculative bubble is when prices go up for no apparent reason. There is good reason why gold is going up, because it is the only currency that isn't printed out of thin air. People want something that will hold value rather than be printed into oblivion. If the Fed raises interest rates and tightens credit and gold continues to go up, then you have a speculative bubble that will eventually burst.

  You can still have a speculative bubble with underlying fundamental reasons for the price going up, it's just that the price is going up much more than justified by fundamentals. I'm sorry, but gold doubling or tripling over the last 3 years is speculation driven because my dollar certainly buys more than 1/2-1/3 what it used to. We aren't having the massive "hidden" inflation you claim as suggested by gold. The CPI isn't perfect, but it's not off by anywhere remotely close to the amount it would need to be to support your claims.
  
  The main thing driving gold is not the printing press - again, take a look at gold for some 25 odd years beginning in the late 70's/early 80's. What's driving gold right now is traditional inflation-protected assets like treasuries, corporates and other interest-bearing accounts aren't paying squat, or keeping pace with inflation, because of absurdly low interest rates. If and when we return to a more normal interest rate environment gold will drop-off a cliff. Like I said, don't be caught without a chair when the music stops. But in a 0% interest rate environment gold is a favored place to park cash so long as people continue to agree on it as a store of value.
  
  If $100 bought a DVD player 10 years ago, and $50 buys a better DVD player today, is that inflation? Should gold buy 4 or 5 more DVD players today than it did 4 years ago, eventhough fundamentally (in terms of productive use) gold is worth exactly the same thing as it was 10 years ago?
• Cleveland Buck

  

  gut;884875 wrote:You can still have a speculative bubble with underlying fundamental reasons for the price going up, it's just that the price is going up much more than justified by fundamentals. I'm sorry, but gold doubling or tripling over the last 3 years is speculation driven because my dollar certainly buys more than 1/2-1/3 what it used to. We aren't having the massive "hidden" inflation you claim as suggested by gold. The CPI isn't perfect, but it's not off by anywhere remotely close to the amount it would need to be to support your claims.
  
  The main thing driving gold is not the printing press - again, take a look at gold for some 25 odd years beginning in the late 70's/early 80's. What's driving gold right now is traditional inflation-protected assets like treasuries, corporates and other interest-bearing accounts aren't paying squat, or keeping pace with inflation, because of absurdly low interest rates. If and when we return to a more normal interest rate environment gold will drop-off a cliff. Like I said, don't be caught without a chair when the music stops. But in a 0% interest rate environment gold is a favored place to park cash so long as people continue to agree on it as a store of value.
  
  If $100 bought a DVD player 10 years ago, and $50 buys a better DVD player today, is that inflation? Should gold buy 4 or 5 more DVD players today than it did 4 years ago, eventhough fundamentally (in terms of productive use) gold is worth exactly the same thing as it was 10 years ago?

  Saying your dollar buys more than 1/2-1/3 than it used to doesn't mean anything. Who is to say gold wasn't undervalued a few years ago? Most people know it was underpriced at $300 or whatever it was for years. And the CPI doesn't include food and energy. What kind of inflation measure is that? It is a joke. Food and commodity prices are rising much faster than the CPI. And we haven't even seen much of the price inflation that is still coming because most of the money the Fed has printed is still holding up bank balance sheets and hasn't made it's way into the economy yet. When it does, tell me we are seeing inflation. Also, just because you haven't the price increases in some places doesn't mean there isn't inflation. How many recessions have we been in with $4/gallon gas? So the prices haven't gone up much, but they certainly haven't fallen to where they should. Pointing at the prices of DVD players doesn't tell much either, first because inflation rarely hits those type of purchases as hard as the areas where everyone spends their money, and second because electronics is one area that the government stays out of the industry for the most part, so prices fall naturally anyway.
  
  I'm sure there are some people that are speculating on gold and hoping to sell it for more dollars. Not that many though. If speculators were driving demand the gold stocks would be outperforming physical gold, but they are lagging behind. People are hiding from the inflation of the paper currencies.