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deflation hoax ...

  1. 24,765 Posts.
    "...Central banks and governments are printing TRILLIONS of paper currencies around the world, the US has now become a socialist society and all this money-creation should result in a huge inflationary tsunami in the future.

    In my opinion, those who are forecasting deflation, don't understand our monetary system. What we have seen in the recent past is not deflation but a contraction in asset prices due to liquidation.

    Today, governments and central banks have the ability and motive to expand the supply of money ad infinitum and you can bet your house that paper currencies will lose tremendous purchasing power over the next decade. So, cash and fixed income assets will probably turn out to be the worst assets to own.

    In fact, I would argue that US Treasuries are grossly overvalued today and they are likely to crash somewhere down the road. In a few years from now, long-term interest rates in the US will go through the roof as the US Dollar and its overvalued bond-market collapses.

    In such an inflationary environment, commodities are likely to provide the best returns.

    Now, I am aware that most commodities have faced intense selling pressure in the past few months but it is worth noting that all assets have been sold indiscriminately over the same period. Despite the recent rout, the underlying fundamentals of most commodities remain strong. And even today, top-quality resource stocks are announcing record profits and cash flows.

    When the dust settles, the enormous amount of cash sitting on the sidelines (US$4.5 trillion) is likely to rush towards the only profitable sector within the economy."

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