How do you measure them? I like to take the rate of inflation and the rate of 13-week Treasury bills. I take the ratio between the rate of 13-week Treasury bills and inflation.
A ratio greater than one means that interest rates are greater than inflation. Money is “expensive”. A ratio less than one means interest rates are below inflation. In this case money is cheap and one can borrow at a rate lower than the price appreciation of most goods. It is a sure thing to make money and encourage speculation.
This chart shows quite clearly what I mean (click on the chart to enlarge it). If you agree on what is shown by the chart, you should also agree that all you hear about why prices are rising (wars, Middle East unrest, Europe, risk, supply, demand) is plain unadulterated nonsense.
The truth is: prices are rising because money is cheap. Make short-term interest rates higher than inflation (money is expensive in this case) as in the 1980s and 1990s and you will see commodities going nowhere as they did in those long years.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer by Timer Digest
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