Jeff Christian Explains Soros On The Financial Sense Newshour

In an interview for the third segment of the Financial Sense Newshour podcast [.mp3 file], starting in the middle of the file, Jeffrey Christian of the CPM Group took some time to explain what George Soros meant by his gold-is-the-ultimate-bubble remark. According to Christian, Soros meant that a bubble economy results in bubbles springing up in several asset classes. "Ultimate" means the end of the road, the final asset bubble.

To put it in another way: once gold goes into a bubble, the bubble economy is coming to an end. After that point, there's little option except to tighten up and clamp down on money creation. Gold entering a bubble means that serious inflation is arriving, and the inflation has to be cleaned out of the system or else it becomes hyperinflation. A gold bubble, therefore, is the end game for central back policy of monetary expansion as economic stimulus.

Christian also brought up an important point regarding gold being in a bubble as of right now: if it were, then the likes of John Paulson, Paul Tudor Jones and Soros himself would not be buying in to it. How common-sensical is it to assume that three legendary hedge-fund managers would be buying at the top of a bubble like the proverbial waiter giving out stock tips? Especially given that the first of the three became legendary by betting on the collapse of the housing market when it was toppy?

Myself, I think that gold's in a nascent bubble - close to the beginning of the real thing. I also think it's going to be a doozy, but I'm getting ahead of myself.