Gold’s bull market called into question by bank analysts

In the Lead: “Sachs and the Citi”

However, the BoJ has good reason to be so persistent in its efforts to bring about “desirable levels of inflation” — something that was talked about a decade ago already. We all know about and are familiar with the effects of noted historical deflationary spirals. Cash is king, consumers hoard it, prices fall, etc. However, go ask the average Japanese consumer (or business) and you might just learn that the dreaded “D” word is…not only not dreaded, but it is…liked. Really, as in: “Hey, that’s not so bad as one might have feared; in fact, it’s pretty okay.”

Bloomberg’s “The Market Now” found that, for example, Japan’s elderly denizens have been benefiting from increased savings and from pensions that buy more as a legacy of such conditions. In addition, falling price spirals such as Japan has witnessed, do not always engender riots, or soup lines — Japan’s unemployment is at a low “we wish we could have that” 4.1% level. The last notable “spike” in Japanese inflation occurred in 2008 when prices “heated up” by 2% only to be followed one year later by a 2% drop in same.

The Land of the Rising Sun has otherwise been “stuck” at near the 0% inflation level since 2003. Also of note is the fact that Japanese investors have been the stand-out sellers of gold on a global basis throughout the past several years. Cash (the “fiat” paper kind that is) is, indeed, king in some places. As for the “D” word, perhaps the Fed might take a page from the Japanese lesson and not fear it as much as it still appears to.

Something else that perhaps we ought not to fear as much as some of us do is the U.S. debt. You know, the fatal, country-destroying debt that will spell the “end of America” as we know it. Well, if you happened to watch CBS’ “Sunday Morning” you would have seen a very relaxed (about the debt) Warren Buffett make certain comments that would have the prophets of American Doom swooning in disbelief and seething with anger. This would not be the first time that Mr. Buffett has irritated the extreme gold bugs with his “unorthodox” take on certain matters.

Mr. Buffett said on that TV show, and we quote: “The debt itself is not a problem. The nation’s debt is [at] a lower percentage of GDP than it was when we came out of WWII. You’ve got to think of it [the debt] in relation to GDP. What is right with America just totally dwarfs what’s wrong with Washington. 535 people are not going to mess up 315 million over time. I know it.” Hey, when it comes to what Mr. Buffett may “know” we would not dispute it. He is, after all, also known as the “Oracle of Omaha.”

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