Long Term Trends
Stocks moved sideways today on the news that we are worried about what the Chinese premier said that we should butt out of the Chinese exchange rate discussion. Bonds went sideways too.
The Dollar strengthened one cent – and is a sideways channel of $1.35 to 1.37.
Gold strengthened slightly (and I purchased some gold last Friday). Oil and gasoline fell, and should now fall much further.
In the news today……
Budget Deficit – Let’s put the US Government budget deficit into perspective. Take a look at a big of history – old and new. We are certainly making history right now.
http://economyguy.com/images/fed_surplus.png
US Inflatlion – is measured as CPI (Consumer Price Index). Take a look down history lane, and see if you can see anything. I see two different long term inflation trends.
http://economyguy.com/images/cpi_history.png
From the end of WWII to 1970, there was one inflation rate, and then the curve bent upwards to much higher inflation rate. Why did this happen? I can give you one coincidental hint. President Nixon took us off the gold standard about when this curve moved upwards. Now here is the question for you to think about. What will the future inflation be? And why? Notice the little jiggle in inflation that took place during the current economic crisis. The great deflation didn’t have much of an impact on the long term trend – did it?
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,642 (up 17)
10 Year Treasury Bond – 3.70% (down 0.01%)
Euro – $1.3674
Gold – $1105 (up $5)
Oil – $79.89 (down $1.85)
Gasoline – $2.22 (down $0.03)
