Today’s Brew 4-22-11

John Tamny spots the recession in this piece for Real Clear Markets:

Don’t Wait for GDP, $1,500 Gold IS the Recession

Excerpt:

Looking at oil and the gasoline that it is ultimately refined into, the prices of both are high because the dollar is cheap.  Keynesians will doubtless note how expensive gasoline will depress consumption, but the greater, more “recessionary” negative of $4 gas is how the cost of one of life’s essentials will depress savings, and with that, the growth capital that funds entrepreneurialism.  Devaluation is surely cruel to the consumer, but it’s devastating to the entrepreneur, not to mention the individuals who might like to work for the entrepreneur.

So while the always faulty GDP number has yet to register a downturn, fret not because we’re in the middle of one. Inflation, meaning a decline in the unit of account, always coincides with reduced savings, and then a misallocation of available savings into unproductive, tangible assets least vulnerable to the currency devaluation.

In short, $1,500 gold IS the downturn, precisely because of what it tells us about the direction of limited capital. As for “recession”, though painful, that’s what we’ll hopefully celebrate sooner rather than later as investors reorient capital away from land, art, rare stamps and faulty lenders/investors who’ve bought into the money illusion that is today’s economic pain.

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