Is the world economy improving or ready to fall off a cliff? Demand driven DEFLATION vs. Monetary Policy lead INFLATION. The U.S. seems to be in recovery, Europe seems to be stabilizing, China is still slowing and many say that Japan is the next collapse in the making. It’s hard to know with all these cross currents which ones will have the greatest impact on stock and commodity prices.

Oil Prices

If you look at any oil chart they are telling a story of economic strength that is going to keep consumption high enough that prices must rise to ration use. In the western part of ND the Bakken Oil Field is being developed so rapidly due to these high prices that there is starting to cause environmental concerns. However, as long as prices remain over $100 per barrel (or even above $70) there will be no let up. Looking at world oil prices Brent Crude is $15-20 above ours, closing at $125 per barrel yesterday.

World Stock Markets

Many look at the S&P 500 or Nasdaq as the stand out performers but realistically we have had huge rallies in all the European markets as well. The emerging markets are still significantly below their 2010 highs but most developed markets are back to pre-crisis levels. Even European markets (disaster central) are back to the highs they achieved prior to the meltdown last August.

You can see by the chart below that the German Dax is back at the highs despite the fact they are paying for all the bailouts:

The following chart is the FTSE which represents the London stock market. They are less involved in the chaos than Germany but due to their proximity and economic ties are just as affected by the slowing effect of all the austerity measures going on. However, as you can see the FTSE is back at multi-year highs.

The one that makes the most sense being at new multi-year highs is the Nasdaq 100 as Apple and other tech companies have been relatively unaffected by the European crisis. The Nasdaq recently hit levels it hasn’t seen since the Internet bubble was deflating. The huge run in Apple stock has been a major driver for getting this index into new highs.

Gold, silver and especially Gold mining stocks have been under severe pressure for months but finally reversed today. For most observers with any bit of common sense it’s obvious that this huge overhang of debt will eventually be monetized through money creation. It’s highly unlikely that everyone is going to settle for 2 decades of “Austerity” to pay down all the debts. As for the U.S. we are headed into the abyss as Obamacare goes into effect and 42 million baby boomers hit the medicare and social security system. The U.S. will not do “Austerity” we will run the printing presses!!

So for most investors the question is not whether or not to own gold and silver, but just a matter of timing.