Almost daily I receive E-mails from subscribers who worry about deflation. Here is my simple answer: “Watch what they do – not what they say!”

The above chart (courtesy Federal Reserve Bank of St. Louis), is up-to-date. It reflects a monetary increase of 305 billion dollars into the US money supply in the short space of under 2 months. Nothing like this has ever happened in the USA before! The little bumps on this chart between August 2007 and August 2008 include Bear-Sterns, Northern Rock, Lehman Bros, Fannie and Freddie and AIG, yet none of those monetary shocks compare to what the FED is doing now.

This is inflation with a capital ‘I’!

Gold will follow as night follows day!

RUF