"Isn't this a bit like worring about the dangers of flooding during the middle of a drought?".
I think that's the wrong line of logic Timber.
What we have is the flood and the drought occuring at the same time, with the deflationary and inflationary forces more or less cancelling each other out for now. Seems potentially unstable to my plebeian eye.
I also couldn't help but notice your assertions recently that gold is a risk asset because of the >0.8 r2 to the Dow.
Given your obvious, strong analytic background, I won't have to point out the dangers of correlation versus causation.
If the USD Index were to run more or less inversely to the Dow (as has largely been the case), what happens when you examine the gold price denominated in USD to the Dow?
Have a look at how the AUD gold price has performed during times of risk-on and risk-off mode. Those peaks occur in risk-off mode! (Yes, this is exagerated by the AUD's status as a risk currency).
