Gold coin investments are up, but so is the dollar.

December 10, 2010 – Gold coin investments are up, but so is the dollar. Treasuries went up but so did long term interest, which is opposite of what is supposed to happen. QE2 has failed to spur growth, but neither has it sparked inflation. Clearly there is a very large fly in the ointment.

Bernanke, however, is steadfast in his confidence in the Fed policy while its members are couching their expectations saying that Fed actions are not intended to be a cure-all. One important reason for the ineffectiveness of Fed policy – and for the so-far lack of adverse consequences – is that global economic conditions have smothered the Fed’s relatively meager attempts to get the economy rolling. That is very worrisome, because Bernanke is intent on making his policy work and so can be expected to give us an even heavier dose of the same medicine. But his policy is based on a highly questionable theory, a product of academia and not the real world proposed by a New Zealand economist over a half century ago.

Steve Forbes, in a Wall Street Journal article summarizes the philosophy in Bernanke’s words: "Inflation that is too low can pose risks to the economy–especially when the economy is struggling." The axiom, called the Phillips Curve, contends that growth must come at the cost of higher inflation and conversely lowering inflation requires higher unemployment. “In other words, stable money is bad for the economy.”

For those who remember the 1970s’ economy mired in the muck of falling equity values and staggering unemployment even higher than today’s, inflation is clearly not the way to get things moving. Common sense dictates that a stable currency is the only foundation on which to build a sustainable economy.

Bernanke’s policies may eventually succeed in creating the instability against which gold coin investments can provide much needed protection.

Kevin Johnson

Senior Staff Writer – GoldCoin.net