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Physical gold vs. paper is a concern that pops up in the Rick’s Picks chat room from time to time. It’s possible there are hard numbers pertaining to this topic that would transcend the usual conspiratorial overtones. Drop by some time and ask about it, Stephen, since there is some deep expertise in the room. Not much argument among the hard-core, though: Paper gold — even stock certificates — is an oxymoron, and if you choose it over physical metal, you invite intrusion upon your financial affairs. RA

The reality is that these pieces of paper have not been “money” in the US for a long time, because in reality “credit ” is our money. Everything is bought with credit by gov’t and the people. Our “money” is the plastic in our wallets, mortgages, home equity loans, car loans etc.

While FR$ are being printed the credit contraction of our real money is sharp and will continue and this can only bring deflation. Shortages and lack of supply may cause future prices increases and a currency devaluation, voluntary or otherwise, may appear to cause inflation (price increases) but

inflation as we know it is almost impossible as credit disappears.

The Bond markets know this in spite of the media constantly ringing the inflation bell.

Until a new type of stable monetary system is found for the US and indeed the world it appears that inflation is not the biggest worry around.

http://www.usagold.com/goldtrail/archives/another1.html

http://fofoa.blogspot.com/

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Thanks for posting this excellent essay, Patrick. The author takes care to note that inflationists and deflationists see the same end result: catastrophic economic collapse and a world thrown instantly into beggary. He is respectful of Prechter, who in my opinion is the worlds’ foremost authority on deflation. Prechter has gotten into trouble with inflationists because of his once very bearish stance on gold. But his thinking has evolved, as gold bugs will have surmised, and he now writes that gold should be a part of any defensive portfolio, since it is bound at the very least to hold its purchasing power.

The resulting collapse of the dollar is certain, and it will happen as Martin Armstrong has described it – instantaneously, in a waterfall cascade. There are compelling reasons for us to expect the entire hyperinflationary episode to play out in a matter of days, and for the ensuing collapse to put the economy in a severe deflationary wallow that will last for at least a generation. That is not how the Weimar inflation played out — it took nearly ten years — and the likely speed of the coming financial blitzkrieg holds very daunting economic implications for all, even those who have secured their assets in gold.

RA

You make a good rational case for the deflation scenario; however living in the Philippines during the Marcos regime inflation was very much alive due to currency debasement.

Even considering that there economic fundamentals were weaker than ours, they still had massive problems with inflation. They also had a problem of a weak manufacturing base and had to import many items which of course were much high relative to their currrency.

Personally, I’m still confused on the “inflation/delflation” discussion. The only thing
certain is that we are about to find out.

Enjoy your info and writing.