Inflation Knocking at the Door. Gold and Silver Looking Better Each Day

The bond market is in panic and it is all because of one word; inflation. The reason for the panic is inflation. Higher inflation destroys the return on the bond, because the dollar is less valuable.

That's a very simplistic explanation, but cuts to the core of the situation. Bond investors see the risk of inflation growing the day and a government unwilling to control it, because doing so would to curb consumer spending, which would sour the perception of the economy.

As the minting presses roll out the dollar, the money floods the market, the value of the dollar will go down. This will sink the bond market as their potential return falls. This in turn limits the money available to the government, who it appears will simply print more money. The other option is a crushing blow to staggered housing market; raise rates to lure investors back into bonds. However, the increase in rates will stymie consumer spending, refinancing and mortages, not too mention the political ills of bad consumer spending reports.

It is a nasty cycle with every action causing a reaction and a perfect example why the concept of central economic planning is purely abstract.

So what does this all mean for the common investor? It means keep collecting the gold and silver, because with the meltdown in the bond market, all sectors are now unstable at best. The rush for gold and silver has only just begun.