How is there even a debate? (Inflation vs Deflation)
Firstly, we are currently, in the moment, deflating. The dollar is rallying and prices for commoditties are tanking.
However, most people on the good ol DP are arguing long term. We all know that this boom will bust, as all easy credit booms do. The arguement is if the economic hard times will be deflationary or inflationary. The arguement is for holding metals vs cash.
This is where I fail to see how people argue for deflation in the long term. Let us look at the facts.
The US government currently has ~9.5 trillion dollars of debt.
Social Security, Medicare and Medicaid are NOT sustainable under current tax revenues. As the baby boomers are beginning to retire they will demand their checks. The government can either default on that obligation or pay with money it doesnt have i.e. either borrowed or newly created money.
The US government has been borrowing and creating money like never before. They borrow to fund our wars. They create artificial credit to bail out. They create money by handing out stimulus checks.
I can tell you,with certainty, that the last thing in the interest of this government is a strengthening dollar.
The only way it can pay off this debt and pay out these massive entitlement programs in the long run is to further debase the currency. There is simply no other way around it.
Buy silver and gold on this dip. I am not sure how many more opportunities like this will come up.
I agree with you
Read this
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/20...
I think inflation will be
I think inflation will be used to pay the national debt, then they will try to deflate in order to restrengthen the dollar.
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Would not deflation increase
Would not deflation increase our purchasing power and thus improve the current situation with the weak dollar? I still don't understand what the fear of deflation is. Seems pretty pleasant compared to hyperinflation. An economic downturn with deflation would definitely seem a better improvment than an economic downturn with hyperinflation.
If somehow deflation completely takes over- wouldn't that mean that the Federal Reserve's "printing money" doesn't really mean anything since the dollar's value ended up skyrocketing? I still don't see how the fundamentals of spending money we don't have has changed at all for some type of deflation to happen without severe change in the monetary system.
Now, concerning the falling
Now, concerning the falling price of gold, we must understand that the decline in gold is usually associated with the market's anticipation of an large scale dumping by governments.Of course, this type of dumping is always politically motivated and has the intent on deception of the public. Now, we must also understand that the price of gold has little to do with the value of gold, since the price of gold is measured solely upon the depreciating exchange value of fiat currency, which is never a good measure for anything, including the price of gold.
Remember, this economy has been inflated, drastically inflated since 1913. Unlike most commodities, gold is basically exempt from the supply/demand equilibrium. If anyone is looking to gold as an investment in fiat terms then they will be sorely disappointed, it should never be considered a sound investment if all you are looking at is to reap a fiat profit, the value of gold is much more than return on fiat money.
Now, concerning the massive debt, our combined debt, both public and private is somewhere close to 300% of GDP, at the beginning of the Great Contraction it was around 299%.
Inflation and deflation are two sides of the same fiat coin, an economy built upon debt creation and expansion has never been able to sustain itself over the long term.
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
I Agree
There is a HUGE incentive for the government to inflate the currency and monetize the debt. Ultimately deflation is good for me and bad for the government because I can buy more stuff with my dollars. Deflation is the opposite of inflation. Prices of everything would drop and eventually I might get a cut in pay. With inflation prices rise and eventually I might get a cost of living adjustment that almost covers the increases. Inflation benefits big government and big business at the expense of the people. The long-term trend is highly inflationary.
Freedom, Prosperity and Peace
Freedom, Prosperity and Peace
The version of Keynesian theory that the Fed. has adopted....
....calls for continous inflation of the money supply. In reality, the Keynesian theory is supposed to have a government spend more money than it takes in ONLY during war or depression. The way the Federal Reserve and Federal Government are running it, we have deficit spending almost every year. Also, we need to force our governments to use simple accounting methods. The only reason to make accounting complex is to obfuscate the truth. (I am not a financial expert, just an amateur, but I am afraid that you are correct about this just being a lull in the storm. People don't understand the powers that be just want to prop up the economy to get us through the next election.)
=)
I am an investment accountant.
I agree
The government and the Fed have painted themselves into a corner and the only way out that will keep the banks and the special interest groups happy is inflation. Big, heaping, steamy gobs of it coming faster and faster.
The only road that DOESN'T lead to massive inflation is massive cuts in the size and cost of government and hogtying the banks. And that just is not going to happen.
The massive losses due to the housing bubble collapse will be taken off the banks and Wallstreet and put onto the helpless holders of dollars and dollar-denominated investments and funds. It is already happening.
bump?
I would like any feedback on this.