Wikinvest Wire

Brit Hume on hyperinflation and gold

Tuesday, March 03, 2009

Normally, all the Sunday morning talk shows are faithfully recorded around here by a trusty Tivo that just entered its sixth year of service with nary a hint of ever stopping (we have an even more mature Tivo Series One that must be at least a decade old now - still works like a charm).

But, nowadays, more often than not, these political talk shows just get deleted to make room for something else after a week or so, never making it up the cable to the TV for viewing.

With the election over, what's the point?

Plus, with Tim Russert gone, all of these shows have a different feel now.

Well, it just so happened that there was a half hour or so to kill the other day so Fox News Sunday was summoned and, after the two guest segments proved largely uneventful despite Chris Wallace's desperate attempts to induce somebody into making a gaffe, the round table discussion with Brit, Mara, Bill, and Juan commenced and they began to talk about last week's whirlwind of activity in Washington.

Juan Williams sighed when Bill Kristol talked about "massive government programs to regulate carbon emissions" and Brit Hume let out a monstrous sigh and slumped over as if he'd just heard that a relative had died when Juan Williams suggested the only real Republican plan for an economic recovery was to cut taxes for the rich.
IMAGE It seems that nothing has really changed in the conduct of the nation's political discourse except for the party in power.

But then came something quite interesting. Brit Hume started talking about the barbarous relic gold and then, of all things, hyperinflation, apparently under the impression that he had correctly deciphered the message that was being sent by the citizenry in their rush to buy gold coins and gold bars at a pace not seen in decades.

Ask yourself this question. Why is the price of gold, at this moment, so high?

Well, some people say that gold goes up because it's a flight to quality and people are afraid. But, really, that usually results in a flight to cash.

The price of gold is up because people fear one thing - people who have money to spend and who are looking to invest or who are looking to the future - and that is that they fear a wave of inflation, perhaps a hyperinflation.

So the people who are voting with their money are not voting in favor of these policies.
Brit is surely onto something there, and just the fact that he uttered such words on national television will surely warm the hearts of many gold lovers, but he's a bit wide of the mark on his analysis.

The three month surge in the price of gold that came to a screeching halt about ten days ago likely had little to do with the fear of inflation, though, that will come soon enough - probably later this year.

As the latest trillion or so in spending, stimulus, and bailouts have been announced over the last week, the price of gold has actually been falling.

What Brit really should have said was that gold is up because it's a flight to quality that used to be satisfied with U.S. Dollars, but after both parties have done such a horrible job of managing things over the years that, when people get afraid now, they run to cash and gold.

It is understandable that Brit may not be tuned in to the recent changes in the dollar-gold relationship as noted here a number of times recently.

However, what is beyond anyone's understanding is how both parties in Washington could lead the nation down the road we are now on, where, in all likelihood, much more protection will be sought in gold than in the dollar in the months and years ahead.


Vespucian said...

I am not voting against Obama's policies, per se, by investing in gold. Rather I acknowledge that there could be high inflation in the medium-term when so much money may be essentially created out of thin air. More-dollars-chasing-fewer-goods, and all that.

I see no alternative to something along the lines of what Obama is doing, lest we have a positively fed back implosion. What does really worries me is how much of the money that will be thrown around will be essentially printed rather than taxed or borrowed. Necessary, maybe, but not desirable. I just hope to God there is something left behind that is wealth-generating by the fiscal and monetary surge by the time the inflation starts really doing it's own damage.

Ted S. said...

You might as well own gold with what they're paying on savings accounts now. The fact that January only has 28 days exacerbated the situation a little, but I couldn't believe how little there was to show after letting the banks hold onto my money for another month. It is criminal what they are doing, especially for older people who count on simple interest for income which has basically been cut by more than half over the last year.

Tim said...

Ted - I know that feeling very well, unfortunately...
(BTW - I think you mean February)

chuckleyaxe said...

If you buy gold at $900 and the price drops to $450 you will wish you'd kept your money in the bank. Gold will always stay high just as house prices did....

little larry sellers said...

It seems that nothing has really changed in the conduct of the nation's political discourse except for the party in power.

Yes, and it's going to stay that way. Things could be so bad that we're running around cannibalizing each other and the political discourse would be largely unchanged. This is why any thinking person who despises one party must also despise the other. It's a two headed beast and both heads need to be severed before progress can be made. Just don't be surprised when these supposed bitter enemies take steps to protect each other if any such movement arises.


What makes you think gold is going to $450 in an era of slashed interest rates and out of control government spending and printing? When even former central bankers (like Volcker) say that fiat is a problem in itself and mainstream hacks like Hume are finally discussing hyperinflation, why would gold crash?

Anonymous said...

If you want to understand "how both parties in Washington could lead the nation down the road we are now on" you've got to read Atlas Shrugged.

AJ said...

larry, the only reason Gold is worth so much right now is because some people want it badly. They want it because they are under the impression that Gold is a better investment than many alternatives. When these alternatives start to become more attractive, people won't want Gold so badly, demand will go down, and you will watch the Gold bubble pop.

Anonymous said...

Flight to the quality of Gold, but not flight to the quality of Platinum?

That makes no sense. How can gold be a quality investment, while platinum is not? The prices (of gold and platinum) have completely de-coupled from their normal ratio, but no one acknowledges this?

I heard this same type of self-deception in L.A. at the end of 2005 - right before I sold my house and moved out of state.

No one believed the truth about (housing) bubbles then, and I don't expect anyone to believe the truth about (gold) bubbles now.

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