Sure, gold and silver have struggled so far this year. The Fed would have us take that as proof that it has inflation under control. And since everything is so well managed, we shouldn’t be concerned about growing hints of QE3. But even Wall Street seems to be having a hard time buying it.
When Fed Presidents Yellen and Dudley were joined by the ECB in calling for more quantitative easing last week there should have been dancing on the Street. There was a bit of celebration, to be sure, but it quickly fizzled out as storm clouds continued to gather.
Partly to blame is a weakening resolve in the eurozone to back the bailouts. As Spain runs headlong towards the cliffs of Gibraltar elections in France and Greece threaten to unravel the accord that has held the zone together these past several months.
The approaching end of Operation Twist just as the markets exit their traditionally strongest seasons only elevates concern. Now the State Department has threatened China and every other nation failing to honor Iranian trade sanctions with exclusion from our banking system.
While all of that is happening the word about real double-digit inflation is finding its way into mainstream media. The average American is all too aware that government inflation figures don’t jive with their everyday experience, but few realize how grave the situation has become.
Both the American Institute for Economic Research (AIER) and Shadowstats.com warn that inflation is accelerating. Shawdowstats.com calculates the CPI according to the government formula in place in 1980, before the Fed started doctoring the numbers. By that measure the annual inflation rate has surpassed 10%.
AIER calculates inflation using the EPI, or Everyday Price Index. As the name implies, the EPI tracks the prices of essentials that we buy every day and excludes major purchases such as housing. For the past year the EPI, at 4.4%, was actually much closer to the official CPI of 2.7%. Over the past two months, however, the EPI has shot up at an alarming annualized rate of nearly 20%.
All of that has come together in one enormous dark cloud hanging over America. But that cloud also has a very bright lining: gold and silver prices have not yet responded to the inflationary pressures as they eventually must.
It is very rare indeed that we are presented with an opportunity to buy gold and silver when they are as greatly undervalued as they are today.