Everyone seems to believe the U.S. is (and has been) suffering from ‘deflation.’ At least that is what Alan Greenspan and his cohorts keep saying, and everyone seems to believe him. Not Richard M. Salsman, CFA. According to Mr. Salsman, “The gold price has risen by 25% this year — and that’s inflation. It’s bearish. Until and unless it stops, no U.S. bull market can take hold.” Quoting him in the December 31, 2002 edition of the The InterMarkerForecaster,

No market price is more important — as a summary measure of what global investors think of a country’s prospects (or its political leadership) and as a forecaster of financial asset returns — than the local-currency gold price. A rising gold price– which means a currency is worth less-and-less–implies a vote of ‘no (or lesser) confidence’ and is bearish for financial asset returns. In contrast, a declining gold price — which means a currency is worth more-and-more — implies a vote of confidence and is bullish for financial asset returns.

Continues, Mr. Salsman,

“The fast-rising dollar-gold price means that global investors are casting a vote of diminishing confidence in the Bush Administration. It’s not because the U.S. is acting in a war-like manner — but because it isn’t. Notice that U.S. markets had begun to improve in early October, when Congress (finally) approved a war powers resolution; that made war more likely, not less. But President Bush and Secretary Powell have continued to appease terror regimes and gangs — and appease more cravenly the more brazen the foreign dictators and terrorists become. U.S. appeasement has intensified the war-mongering of those savages who run North Korea.”

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