Egon von Greyers: Hyperinflation has already started.

Von Greyers makes the point that since food prices increased 19% in the first quarter of the year, an annualized increase in food prices of 76% is a good start toward hyperinflation. As I noted earlier in the year, art objects and high end real estate have already gone up in price and the increases have been spectacular. What has not taken off YET is the price of those items where US businesses are in competition with items imported from other countries. Thus, a pound of T-bone steak now costs $8-9, while a pound of Ancho (Anaheim) peppers grown in Mexico costs $1.80/lb.

 The underlying cause of inflation is due to the printing of more money. The FED's binge of money-printing  has been covered up by the FED forcing the banks to increase reserves and by the manipulation of the gold price.

A lot of the newly printed money is fueling the Stock Market rise in equities. The FED's idea is that a rising tide lifts all boats. This may be true of the big seaworthy yachts, but the smaller boats have sprung leaks.

A good way to follow the effects of inflation is to look at the DOW/GOLD ratio. This ratio I planned to reproduce below; however, Blogger refuses to do it. Maybe later. The ratio was over 20 in the 1920s when stocks were high and gold was low then hit 2 as stock prices crashed in the 1930s. The ratio then began to rise and hit near 30 in 1964. Then it began to fall and hit 1 in 1980 when both the DOW and GOLD were 850. On the way to this, the ratio rallied as GOLD dropped from 200 to 100, before resuming the drop. The ratio rallied to over 30 in 1998 as stocks rallied. Then the ratio again started falling and hit a low of 6 in 2011, before the current rise. , which took the ratio to about 15. The current rally in the ratio is due largely to the engineered drop in gold price. When this blip is over, the ratio is expected to fall to 0.5.


How will this drop occur? Well, the DOW could drop to 3,000 and gold increase to 6,000, but the FED will not let stocks drop that much. Or, the DOW could rise to 25,000 and GOLD to 50,000 as hyperinflation hits the US dollar. My connecting the dots points to a number of 0.3, the DOW at 25,000 and gold at maybe 35,000.