Greenspan: Explosive Inflation Ahead
from Grams Gold Alan Greenspan is at it again. First, he spoke about how gold, how stocks are over-valuated and is money and how the economy is like it was during the last stages of the Great Depression. Now he’s warning that Americans are in for explosively higher inflation. His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year’s New Orleans Investment Conference. Mr. Lundin said, “Greenspan made some good points to me. He said the weakening Euro would not be that damaging, because we only trade with Europe about 15%. But, he was concerned about inflation. He was specifically concerned in relation to the excess reserves which are close to three trillion dollars being held on the Fed balance sheet now.
That money is just hanging over the U.S. economy like a big water balloon of liquidity and it’s just searching for a pin. He believes that the release of those reserves will result in much higher inflation. The Fed just hopes they can get out of this alive. They have to realize that a normalized interest rate environment is fiscally impossible for the US.
Every 1% equates to $140 billion dollars to the interest rate payment burden. 5% would be an extra $700 billion dollars, before we paid for entitlements or defense. The public is not going to put up with that. In fact, Greenspan referred to [the $3 Trillion in reserves] as a tinderbox of explosive inflation looking for a spark. He recognized that it was primarily the issue that would result in much higher inflation for the US down the road. He believed that it was inevitable that the release of those reserves would result in much higher inflation.” So what does “much higher” inflation mean? Does that mean doubling, tripling or quadrupling of prices? Or does it mean “hyperinflation” where prices increase by percentages in the thousands? If the cost of food goes any higher, people will be in serious trouble. The same goes for healthcare. Americans are getting “killed” by those prices, and more literally by the restricted access to doctors, hospitals and treatments. On precious metals prices, Lundin goes on to say, “Most people [at the investment conference] seem to share my belief that we’re bouncing around the bottom… that we’ve not necessarily seen the absolute lowest prices in metals but that they can’t go much lower than this because we’re right around the all-in cost of production. Your downside risk is maybe 20% but the upside risk for really good companies that have good projects is on the order of 300% to 400% once the market gets back into gear. Very few people realize how strong demand is for gold in China. That’s literally the biggest story for gold right now Continue Reading>>>