Thursday, October 25, 2012

Dollar Sell-off and Hyperinflation by 2014 – John Williams

My timetable for a dollar collapse is between 2013 - 2015.  I guess Williams split the difference.  The truth of the matter is it is impossible to predict the exact timing of events with reasonable accuracy, and when they materialize, it's mostly due to luck.  But if history is any guide, bull markets in gold during the 20th century--usually accompanied by economic and financial uncertainty--lasted 14 years.  The price of gold made a double bottom in 1999 and 2001.

If the number 14 seems arbitrary or coincidental, it may not be.  It usually takes a generation of doubters and short memories before reality takes hold.  Gold bugs have been mocked and ridiculed during this whole 11-year bull market run, despite gold appreciating 7-fold.  We're being castigated as lunatics even though we have been right for over a decade, over four decades, and over several millenia.

Meanwhile, the masses, both professional and retail investors, have been touting or buying equities, bonds, and real estate.  Equities have tanked twice in a decade, while real estate is still bouncing along its bottom.  The bond market has rallied for almost 30 years, but its upside is now severely limited--by definition, as yields are essentially 0%.  The credit bubble is one for the ages.

What should give readers pause about rosy predictions from mainstream, Keynesian economists is they are notoriously wrong at every turn.  Look to the Austrian school of economists, as they warned of the subprime mortgage crisis with uncanny accuracy, assigning soaring debt levels as the primary cause of the bubble bursting.

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