Time to bank inflation profits?
The 'inflation trade' has produced strong returns for many traders in equities and commodities. But with gold, oil and copper showing signs of weakness, the party may finally be over.
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Comments PolicyKaren, I cannot believe you really think the Fed will cease quantitative easing come June. (See Time to bank inflation profits?, January 27.) Who do you think is going to buy the US deficit funding that will continue into the indefinite future? It is the Fed who will have to buy it via monetisation of US Treasuries. In addition, it is not just the US who is, and will be, printing money. The drop in precious metals prices is only temporary – the bubble is not in precious metals, but in fiat currency, whose ultimate value will be nil in the years ahead.
Irony. Bernanke's worries about deflation have caused inflation although he claims this can be controlled. Now worries about inflation risk causing deflation, which he claims he can control. (See Time to bank inflation profits?, January 27.) Who knows what will happen?
Bottom line: the US government and its financial system is by and large insolvent. No solution will save the depreciating USD in the long term. While AUD commodity prices may fluctuate, there should be little doubt about the long term direction for commodity prices in USD.
Karen, love your work, you are one of the best. However I believe that commodities will rise as the US$ crumbles (See Time to bank inflation profits?, January 27). We live in a totally false world of values as Walmart and Boeing are finding out that exporting jobs is not creating value but destruction of communities and spending power.
The question is currency, currency, currency and the answer is stop inflating. Why do I hold gold and commodities? (See Time to bank inflation profits?, January 27).