Saturday, August 4, 2012
Inflation AND Deflation
People involved in the financial world are worried about deflation, people involved in the real world are worried about inflation. Guess what? They're both right. The value of paper assets is way out of proportion to the value of real assets. The way that gets correct is for paper assets to fall in price and/or the prices of real goods to rise. The last couple times this happened the process ended when the price of gold was about equal to the price of the Dow Jones Industrial Average. Since we're at around $1500 an ounce for gold and $12000 for the DJIA, we have a long way to go.