How long does it take before Ben Bernanke realise that inflation is the main concern of world economy for the next 10 years. How long does it take before Ben Bernanke realise that US is getting close on the famous "liquidity trap" that hit Japan around 2 decades ago. How long does it take for Ben Bernanke to realise that prices of everything around us are heading for the sky? How long does it take before Ben Bernanke understand the concept of "artificial demand" and scarsity?
How long does it take, Ben?
The answer?
Never!
Why?
Well Bernanke is a Phd holder in Economics. Although he is a full-blooded Keynesian, I am sure he heard one thing or two about classical, neo-classical, monetarist and new-classical theories of potential GDP and Ricardo Equivalence etc.
He announced yesterday that FED will keep the stimulus going indicating that the key interest rate will be held at 0-0.25% range for god know how long.
He also said "if inflation persist or if inflation expectations begin to move, then there's no substitute for action....... we will have to respond"
Well Mr. Bernanke, why do you think gold prices rise above $1530/oz? why do you think silver rise above 48.50/oz? Why do you think every commodity (marketable or not marketable) rise at least 50% from their low (most even exceed the previous high and historical high) eventhough economy is going marginally better (well according to Bernanke, at least)?
Inflation expectation has been going up to the moon. US dollar is going to thru the floor. All the signs you need for an outbreak of inflation.
However, the smart people in the Federal Reserve do not think so. They still think inflation / inflation expectation is under control and each month they announce inflation rate using their "formula" that only insane people will believe.
So what should we do to protect ourselves from the rage of inflation, liquidity trap (in US) and the insanenity of Bernenke?
Well historically, when a nation is experiencing hyperinflation (or very high inflation), financial assets tend to rise faster than the inflation rate.
So, put your money on inflation protected assets. precious metal is the number one choices (as mentioned by me many many times already). Gold can't exceed 5000? silver can't exceed 500? Let wait and see!
Besides that, choose commodity that their demand has been artificially increased yet the supply is going nowhere. Grains such as wheat, corn, rise and barley would be nice choices as well.
Manage you money well or get trap in the dead sea of inflation!
