Morici: Why Gold Prices Are Soaring
Published: Wednesday, 12 May 2010 | 1:54 PM ET
By: Peter Morici, Smith School of Business, University of Maryland
Gold prices are soaring because of growing inflation fears—both the European Central Bank and the Federal Reserve seem to be on the path to permanently easy money with the Greek bailout and huge U.S. budget deficits.
Neither the reforms attached to the Greek bailout nor banking legislation in Congress get at the structural problems that caused failures in Athens and on Wall Street.
Soft reform is no reform—investors are fearful too much money will undermine the value of euro bonds and U.S. Treasuries—even if those bonds don't outright default.
The bailout for Greece and aid for other debt ridden Mediterranean economies provides hard commitment of assistance but does not address the fundamental structural problems that cause Greece, Portugal, Spain and other less prosperous EU states to spend too much.
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