Deflação ou inflação?

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Congressman Ron Paul, a first class student of the economy, recently pointed out that Alan Greenspan has “wildly inflated the money supply by creating more than $5 trillion in new dollars since he became Fed chairman.” Paul, ominously warns, “..the nation someday may regret not taking a closer look at the Federal Reserve and its manipulation of our financial fortunes.”

Volcker’s comment on Greenspan’s creation of 5 trillion new dollars: “We have an amount of stimulus beyond anything in history.”... “We have a record current account deficit and we’re living off the munificence of strangers. The only reason we’re getting enough to fund the deficit is that Asian central banks are vigorously buying dollars.”

Money supply is growing at rates not seen since the 1970's. Greenspan won’t be able to get away with this. His only hope is to retire before the inflation from all this money printing hits the fan.

In my view, you have to be insane to hold bonds now. Given the prospects for major inflation ahead,the next big move in interest rates will be up. This will destroy bonds. Get out today.

If you haven’t realized it yet, take a look (click the five year chart), gold is already in a two year uptrend. Given what Greenspan is doing, this is likely to be just the beginning. Gold is where a good portion of your conservative money needs to be.

Stephen Roach, chief economist at Morgan Stanley, put it best, “The Fed, in effect, has become a serial bubble blower.” The bond market, the real estate market and the stock market are all at various bubble stages. The bond market will bust first. Down the road there will be trouble for real estate and the stock market, but for now Greenspan is blowing enough hot air (i.e. new money) to keep these two bubbles afloat for one more climb to nosebleed heights.

So consider yourself warned. The bond market run is over. You can have some fun in the stock market in the months ahead, but your real money needs to be in gold.