On a related note, China has started to step up gold buying and along with the reports on base metals investing, this may be the first indications of China starting to export inflation. Some strategists have been saying since ~2000 (when China really turned up its export machine) that China would be exporting deflation initially (think low cost labour) but as their domestic economy picked up they would start to export inflation (every Chinese owns 2.3 SUVs, big refrigerators etc.). At the time they said that this would start happening when China started to let the RMB rise because this would signal that China needed oil more than selling plastic toys to the US. That might not happen yet if China can secure these assets with their truck load of USDs, but private citizens may start the inflation with their private investments.

My personal experience is that my cost of living has gone up less than the official CPI over the last 10 years, even though sources like “Shadow Stats” calculate that CPI is massively understated. I have never understood the owner’s equivalent rent part of the CPI, but excluding that the CPI doesn’t appear to me to be that far off.

State universities cost so much more today than years ago not just because of inflation but because the most states have cut back subsidies dramatically.

My parents bought a house in 1983 in Ohio and sold it at a CPI inflation adjusted loss at near the peak of the market in 2004. Real estate depends on location.

The health care and finance industries are bloodsucking drags on the economy.

Based on official gov stats and CPI … but looking at my parents house value over that time period … typ 35X … actually outpacing gold … for most people CPI underestimates “real buying power”. Tuition+accomodations has been one of my biggest personal expenses (vastly outpacing food & clothng) … I think it easily trumps CPI rises as well.

As TPC and I have discussed many times the inflation/deflation argument is a tricky one and I think you are right for the most part.

I view it as consumer deflation. What do consumers have – homes, cars, durable goods, etc. That is why, except for a few AG plays, I don’t want to be in those asset classes.

However, look at who and what will be spent. I think we will have commodity/infrastructure inflation – governments including ours and China have definitely move towards green technologies and the space is awash with cash, so for those asset classes I think they will rise.

Then we get to the average investor, mom and pop and the “smart” money. Bernake will not raise interest rates, I think he will expand the MBS buying, etc. Then look at the budget, it is exploding and no one is stepping in to stop it. Obama runs the show for three more years. I’ll readjust my perspective then.

Until that time, it looks like the inmates are running the asylum and fiat currencies are going to be broken. Currency markets will fluctuate like mad I believe.

Gold is not a pure inflation play, it is, however, a credit crisis play.

The credit crisis is far from over. And yes, a repricing is coming.

We are adding almost 20% of the national debt FOR THE LAST 230 SOME YEARS, in a year.

Yes, fiat currencies are in big trouble and will all slide downwards from here, with I’m sure bumps and bruises down the way.

I do think gold has made a sustained move north, sure it could drop below 1000, but I don’t think in the next five years that is the case.

And what is the future, the morons are trying to break the balance sheet even further. You tell me how this plays out.

And I’m not trying to be confrontational, I read your comments all the time and respect your opinion greatly, I just think a sea change is at hand and gold, essentially, has been repriced. I look forward to your response.

Gold cost $459 in 1979 ($1,365 in 2009 dollars) as the bubble really started. Gold went up 10x in 10 years but prices only doubled. An overreaction. Even today prices are only about 6x 1969. Gold hit over $2,100 in 2009 dollars. Then collapsed even faster than the NASDAQ bubble. Not quite as fast as last year’s oil bubble.

Buy gold. It may go to $2,000. Nevertheless, I think it is already priced in anticipation of prices more than doubling within a decade. Since 1999 gold has gone up 3 1/2 times but prices have only gone up 30% or so. The dollar is down 40% against the Euro. How does that justify a more than tripling in gold? Much less a lasting move to $2,000.

Gold is either speculative play at over $1000 or it has been permanently repriced in comparison to its historical value.

The currency markets are going to blow many people up, many people.

Short all fiat currencies. They may be here to stay, but tell me how much that dollar bought in 1950, 1980 and now.

Much much devalued.