Sunday, October 17, 2010


By Annaly Capital Management

The value is frustration old age. As every schoolboy knows, it gives nothing and therefore cannot be assessed on cash flow. There was very little industrial use. However, there is a natural tendency and human use of money or is an obvious candidate for rare, sustainable, portable and currency transferable form. Nothing press print (or helicopter) gold. Throughout history, the yellow metal was indisputable store of value, including periods of inflation as the 1970s.However, its price is volatile and certainly succeeded in losing money for investors over periods shorter that, say, a few decades table below, we illustrate the point drawing prize or corrected for inflation versus the year change more core CPI.

The inflation fell in the early 1980s, gold fell with her.The relationship between the actual prices and inflation appears to be falling in the recession of 2000, where inflation has begun to decrease but yet started a new market of taureau.Prix real current gold are at levels not seen since 1980, when inflation was running at more than 12%, despite the current levels of less than 1% inflation. But must be in a bubble, right?

Not necessarily.Another way to think of gold is also insurance against debasement of the currency and future inflation .the ' insurance policies that debase the currency is worth something, because a falling dollar erodes your overall, while purchasing power as inflation erodes your home buying power. The graph following parcels of real gold against the u.s. dollar index prices. The reverse relationship is easily identified.

The strength of the dollar that we have lived in the late 1990s did not at the top that the Fed is less than 2% on the rate target at the end of 2001. The steep decline in the dollar has coincided with the gradual descent rate of funding of the US Federal Reserve 1% over the next two years, featuring a sustainable Fund for the price of gold.The dollar has never recovered and has been bouncing on a background from Beach, your insurance policy mistakes brought skilful fruit that genuine gold prices have quadrupled since.

However, the gold insurance is now a different value proposition that it was in 2000. It's more expensive, but it appears that the risk of monetary blunders has also increased. It lacks any views on the current price of gold (see the appearance of Mr. T on Bloomberg TV), but as Manager of funds based on the United Kingdom, Jonathan Ruffer said: "There is now a security tax."

Question: If monetary policy has not been effective in the generation of inflation, which should cost insure against it?


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