Discussing the relative value of different indicators in measuring the state of the economy. The Dow Jones, now approaching 11,000, is often mistakenly used as an overall barometer but can easily be inflated by increases in the money supply through quantitative easing. Unemployment at 9.7% or underemployment at 17% hardly justify a case for a sustained recovery. The dramatic fall in the civilian Employment-Population ratio (Figure 1) recently is ominous. Given the amount of money pumped into the system, it seems more likely that the Dow Jones is rising on the tide of inflationary pressures that have yet to work their way into the PPI and CPI. Reviewing the Wall Street Crash of 1929 (Figure 2), it is noteworthy to consider the several rallies following the initial fall. The first crash took out the speculators, but the following declines took out everyone else. A sobering consideration given that price-to-earnings ratios are currently as bad as during the 90's dot-com bubble. The current subsidies for the housing market also seem to be simply enhancing curent sales at the expense of future demand. The rise in gold price currently ongoing (Figure 3) is a good indicator of the pressures building up due to Bernanke's loose monetary policy, a policy unlikely to change soon. The vulnerability of fiat currencies is exemplified by the problems of the euro zone. Investors are fleeing the euro during the current Greek crisis as they fled the dollar during 2007 and 2008 due to fiscal, structural, and systemic concerns. Much of that euro flight is finding its way into gold, as evidenced by its recent rise despite recent dollar strength. The potential exists that demand for gold will outstrip supply as fiat currencies falter, particularly because the best way to protect your portfolio from the vulnerabilty of paper assets is by ownership of hard physical assets like gold. Featuring Pete Grant, Jonathan Kosares and George Cooper.

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