Federal Reserve

Lots of People Are Mistrusting Your Pretty Paper, Ben

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The guy responsible for making as much paper money as he pleases wonders why some investors are beginning to think that might not be a stable system in the long term:

Federal Reserve Chairman Ben Bernanke says he's a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk.

Those still into Treasury bonds don't seem panicked yet; Bernanke notes that more conventional measures of inflation expectations like treasury bond yields haven't been rising. And copper is down. Gold is likely being bought by those to whom lending money to the government at all seems like a bad deal these days, and who remember that gold has been a historically more conventionally useful money metal than copper.

We might also just be witnessing a traditional lemming-like bubble rush to the thing that seems to be rising in value lately. I hope that's true, because if the people driving up the price of gold are right about inflation expectations, things will get ugly.

The latest bad food inflation news:

Food inflation will accelerate to a 5 percent annual rate by December and average as much as 4 percent in 2010, topping government forecasts as meat and dairy costs jump, said William Lapp, a food and agricultural economist…..

The U.S. Department of Agriculture reported April 23 that retail-food prices will rise 2.5 percent to 3.5 percent this year, after dropping 0.5 percent last year.