February 14, 2012

With investors globally wondering what central planners are up to next and how it will impact gold, today the Godfather of newsletter writers, Richard Russell, was discussing this very subject: “A few months ago I wrote a piece about avoiding pain in the economy. How do we do it? We do it by turning away from austerity and embracing inflation. And the question — will the inflationary method of avoiding economic pain kill our economy, just as the drug (taking drugs) way of avoiding pain has killed so many talented musicians? I think the results will be the same.”
“The world has drunk at the punch-bowl of good times and debt ever since World War II. The world has avoided the discipline of pay-as-you-go and austerity for decades. But sooner or later the piper must be paid. Up to now, the piper has been ‘paid’ with vast amounts of fiat paper.

The politicians want to make the people happy. The Fed is beholden to the politicians. The voters want it all, and they don’t like pain. The Fed and the politicians want to make the voting public fat and happy causing as little pain as possible.

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