CASE FOR GOLD is clear enough, but when should we look
to sell?" asks Dylan Grice in Tuesday's strategy view, Popular Delusions,
from French bank Société
Générale's London office.
again US Fed chairman Ben Bernanke is compared to
Rudolf von Havenstein – the Reichsbank president who presided over
Germany's hyperinflation of the early 1920s. "The political winds in
countries with central banks are a long way from blowing in the direction of
fiscal rectitude," says Grice, noting that "Talk is very
cheap" when it comes to raising interest rates.
dramatic crisis has ever made curing inflation "politically
feasible" in the past, says the SocGen strategist. And the current
political consensus, still fearing the long shadow of the Great Depression,
says inflation is actually helpful, not a problem (read: On Walton Mountain here...).
doesn't recommend a short
position in Treasuries, but calls today's Western public
finances "unsustainable" and government leverage
"explosive". Grice believes
government funding crisis is both inevitable and necessary [and] Dubai and Greece are merely the first claps of thunder in
what is going to be a long emergency.
there will be a crisis of such magnitude that the political winds change
direction, and become blustering gales forcing us onto the course of fiscal
sustainability. [But until then], the temptation to inflate will remain, as
will economists with spurious mathematical rationalisations as to why such
inflation will make everything okay.
meantime, "the outlook will remain favorable for gold,"
says SocGen's strategist. "I own gold because I'm worried about the
long-term solvency of developed market governments."
Disclosure: Long Physical
Head of Research
your first gram of Gold free by opening an account with Bullion Vault : Click
for The Daily Reckoning in London, Adrian Ash is head of research at BullionVault.com –
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Please Note: This
article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on