RE:RE:RE:RE:RE:Oil is cheap compared to gold Ginger...Great post!!
In terms of the inflation numbers, Government changed the way it was calculated in 1982. Before that, there was a "basket of goods" and they found the prices for those things in the basket and then calculated the inflation number. This was changed to a "standard of living" approach and there was no fixed basket of goods (so the basket was a moving target and subject to some degree of manipulation). The "new" theory was that if the price one thing went up a lot then people would substitute for something else which is cheaper. For example if the price of beef went up a lot more than say chicken people would buy more chicken. So what happens in this example is that chicken is then weighted more heavily when calculating inflation. The end result is a lower inflation number. If the "old" method was still used the inflation rate would for sure be much higher than is currently reported. I have seen calculations suggesting a factor of 2X higher.
In terms of the saving rate, what happened in the early 1980s was that Government budgetary deficits rose to the point of crowding out private and personal investment needs and interest rates skyrocketed. With the US currently running 2 trillion dollar annual budget deficits and according to the CBO this will rise to 3 trillion in a few years (assuming no more spending plans by Government which is highly unlikely - so it will be even worse), I have a fear that we may indeed see something similar to what I lived through in the early 1980s.
IMO, this possibility is not priced into the market. The market is enjoying the stimulus resulting from the budget deficit but this is simply not sustainable. How long it takes for the economic forces to dominate is anyone's guess but it is certainly something I am watching very carefully. I don't plan on being the one looking for a chair when the music stops.
As for the gold/oil price ratio, as I mentioned in my earlier posts, we are at the upper bound of this from a historical perspective and so something has to give. If you are on the right side of this you can make a lot of money. The converse is also true.