Categories: Precious Metals
Topics: General Precious Metals

Dollar Declines as Gold Rises

July 15, 2009

 

Bill Bonner
Agora Publishing & The Daily Reckoning
Posted Jul 14, 2009

Yesterday, stocks went nowhere. Oil went nowhere. And the dollar went down as gold went up.

The reason for the dollar's decline and gold's rise was given in the front-page headline of today's Financial Times. China launched a "new dig" at the dollar, it says. As near as we could tell, China merely stated the obvious - that the world is going to have to find a better monetary system. The US dollar won't be king of the hill forever. And China, which is up to its neck in dollars, would like to find a solution sooner rather than later - that is, before the dollar goes the way of all paper.

The dollar will eventually give way to inflation and devaluation, but probably not soon.

"I'm absolutely worried about inflation," says John B. Taylor.

But here at The Daily Reckoning, it is not inflation that worries us... it's the lack of it. Making a long story short, as long as the feds see no inflation they will continue trying to create it. In the end, they will get more than they wanted.

And where will investors flock when that day comes? You guessed it - to our favorite yellow metal.

Though, right now, instead of inflation, we have deflation. Today's New York Times tells us that deflation in Ireland has reached 5.4% - the highest since the Great Depression of the '30s.

You know the reasons for deflation as well as we do. The world suddenly has too many people who borrowed too much money to buy too many things they really didn't need and really couldn't afford. This caused the world's producers to greatly over-estimate the 'real' demand. Their customers began to disappear in 2007. Their factories are still standing.

Jul 13, 2009
Bill Bonner
email: DR@dailyreckoning.com
website: The Daily Reckoning