1) Wait for the Euro mess to boil over. There's the potential for that to explode into a worldwide depression in the next couple of years and we can't tie our hands in case we need to do serious damage control (and I mean to our own economy from the fallout, not bailing out theirs).
Do you think that's more or less likely in the last week since France & Greece voted out a bunch of austerity-favoring politicians?
2) Wait for employment and consumer spending to get back to an acceptable level (where exactly I'd leave to someone more knowledgeable, but clearly not where we are now).
The problem I see with that approach is that if they do recover to some acceptable level, it'll be argued that the spending has to continue in order to maintain them at that level. Which may in fact even be true. Not sustainable, and not a solution, but true.
3) Watch inflation. We should be trying to optimize both inflation and employment (which are roughly inversely proportional), and right now we're doing too good a job on inflation and too bad a job on employment.
I fundamentally disagree that ANY inflation is desirable. All my life I've been told that 3% annual inflation is just good for us, but 3% inflation halves the value of a currency in 24 years ... halves it again 24 years after that ... in the average person's lifetime, it erodes 90% of a currency's purchasing power.
Why is deflation a bad thing? Why is it so horrible for products to become more affordable over time? Everybody loves it when it's a computer or cell phone. Why is it normal or desirable for food, clothing, transportation, everything else to get more expensive over time? Why is it a good thing that a fast food combo meal cost me $3-4 when I was in high school, but 20 years later costs me $7-8? That's
only about 3% annual inflation.
The stock answer to this is that deflation encourages saving, not consumption, and hurts the economy. Oh my god, the horror. Imagine a world in which investors didn't have to chase riskier and riskier targets to beat inflation, in which individuals could reasonably expect their savings to be worth something in retirement.
Gold's up 4x since it's long stint around $300-400 but other goods haven't quadrupled in price. There's a lot of emotion involved in its price. I also personally believe China will essentially set a ~$1600 floor on its price no matter what happens, because they'll buy unlimited quantities at that price. I think they're taking the long view that gold bought today (even at a bubbly price) is a better long term bet than their other options.
Oil is expensive, despite a huge global economic slump, partly because of rampant speculation and unrest in the middle east, but more (I think) because global production
genuinely plateaued starting around 2005, and we're staring down the barrel of a very, very unfavorable supply-demand problem. "Peak oil" hit US domestic production 40 years ago; it's not a theoretical phenomenon. It's hitting global production now.
So I don't look at oil and gold prices as particularly evidence of inflation, per se. Those trends are ominous for other reasons.