Those of you who remember my old blog, (which I deleted) will remember my frequent references to Galbraith and his bubble theories. We have now burst the ultimate credit bubble.
Previous bubbles were symptoms of excess credit and their bursting (eg the Dotcom bust) were solved by making credit even more lax.
This one is the big kahuna, and the Central banks and policy makers have no idea how big or bad things will get. If you had any doubt about how bad it is, today's announcements that the Fed will buy US treasuries, which follows the Bank of England saying the same a couple of weeks ago...should give you some idea.
We are already at near zero interest rates everywhere, and that wasn't enough. Then they bought damaged assets from the Banks and AIG and paid off their bad debts, but that wasn't enough. Now they are buying their own debt. This is a way of printing money.
So everyone today played the inflation trade- the $US dropped, Gold rose. However I think we are a long way from inflation. I could explain why, but Matt Stiles has done that very eloquently at the link below. He also describe the changes that are taking place in society where conspicuous consumption..big houses and cars are no longer as acceptable as they were.
I think Range Rovers are going to have quite a few years of weak sales.
When should you buy gold? - Goldbugs got excited recently when the gold stock to gold ratio turned up sharply after the gold price consolidated sideways subsequent to breaking up from...
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