Inflation? Pfft..

New York Times article on why some academics think that inflation may not be as big of a threat as we fear.

Dad has been bullish on gold for some time because of the inflation threat, believing that gold will reach post $1000 levels again. (When inflation rises, the prices of commodities such as gold and oil rise because they are traditionally seen as inflation safeguards) The rationale: The Fed is pumping an extraordinary amount of reserves into the economy and keeping interest rates low, and all things remaining constant, that will lead to a rise in economic activity and inflation. (I’m not sure, but was there runaway inflation in the post-Great Depression era?)

However, it’s true that banks are now too frightened to do anything with the reserves they’ve received but to hoard them. This certainly wouldn’t boost economic activity, so perhaps our inflation fears are overstated. I’m not one to take investment ideas from articles, but perhaps I shouldn’t be so blindly bullish on gold as I was.


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