With the Fed making inflationary concerns second fiddle to job creation, gold looks attractive as a hedge against rising prices
"Bernanke's battle for jobs eclipses inflation concerns," reads a Sept. 14 Bloomberg
headline in the wake of the Federal Reserve's announcement that it will launch unlimited bond buying, or quantitative easing (QE).
Cabot Money Management portfolio manager William Larkin was just one critic who voiced concerns to Reuters
about Fed chief Ben Bernanke's plan. "They are definitely stepping up," he said. "It creates an inflation outlook concern because if you are doing it for this extreme for this length of time, my biggest question is what is going to happen to inflation in two years?"
And what about inflation now? As CNN just reported
: "The Consumer Price Index, which measures a broad basket of consumer goods, showed prices rose 0.6% in August. It marks the sharpest one-month rise in inflation since June 2009, according to the Bureau of Labor Statistics."
Likewise, "the Labor Department said its seasonally adjusted producer price index increased 1.7 percent last month, the largest gain since June 2009, after rising 0.3 percent in July," Reuters reported
Given that modern inflation figures issued by the U.S. government are tabulated using less-stringent methodologies than in years past, and given that these figures can be susceptible to "massaging" for political reasons, costs are likely rising even faster than officially reported.
Central bankers are possessed by a hubris by which they believe they can keep the inflation genie in the bottle despite their rampant money printing. Before inflation potentially gets out of hand, gold
might be a good way to hedge your portfolio if things don't turn out as Bernanke has planned. After all, his terrible economic forecasting track record needs no introduction. He is the Fed chief who notoriously, repeatedly declared the economy fine in the months leading into the 2008 financial crisis.
As philosopher George Santayana said: "Those who cannot remember the past are condemned to repeat it."