Wednesday, January 30, 2013

Deflation versus Inflation: the Fight Continues.

Many dollar-deflationists are in a false sense of complacency. The worlds central banks have unequivocally stated that they are now in money printing and gold buying mood.

Apparently there is a dark wee world in finance called the interest rate swap market. If interest rates begin to rise here, and you will not be the first to know this, then inflation will be signalled. Right now, Japanese bond holders are still expecting deflation as their bond rates are still low; as too are US bond holders.

But Prime Minister Abe in Japan, has trumpeted the need for 2% inflation in Japan, and the deep dark swap market may be beginning to stir. Certainly, it appears that large hedge fund managers are shorting Japanese bonds.

What the final signal will be that inflationary expectations are about to stir is not known. Gold is being kept in check but this will not last.  Will the end game manifest itself in hyperflation of the US dollar? This after many other currencies have died.

Who knows where this will end. But gold looks likely to be a basis for an international reset.

Gold in New Zealand dollars: $1984.26 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $37.47 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)

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