Gold and Deflation And The Greater Depression

Feb. 3, 2011 - PRLog -- Gold And Deflation In Deflation And The Greater Depression?

By Delwyn Lounsbury - THE DEFLATION GURU

The history of gold and deflation is not good.

We recently had a worldwide banking crisis and gold and silver have recently ramped up in price due to monetary stimulus, fear and uncertainty. I am a big fan of gold. Gold and deflation could mean a drop of 50 percent in it's price. It is still catastrophe insurance and will probably not drop the 90 percent some other assets may. Gold is money.

What the world needs is gold backed money or we are doomed to repeat this whole inflation inflicted infection mess again. Only gold is not someone else's debt. Only gold should back only private enterprise free market money. Don't trust any government sponsored and controlled fiat money. Gold has a 5,000 year history as mankind's money. Egypt flourished due to gold mines they found in northern Africa. Just about every powerful nation or empire since had a gold find inside its boundaries or a gold rip off from another country as it basis.

Gold is honesty. Only gold will prevent a future runaway hyperinflation. Hyperinflation helped Hitler hustle everyone. Do not let the world go there again! You will only get the anti-Christ besides the "anointed one" we already have in office. I mean it. Credit inflation debt does this dastardly deed. Deflation is only the cure. Gold backed money will keep us from repeating the whole fiat money, inflation, deflation followed by depression "conga line" again and again. ONLY GOLD! Only gold and deflation will cure inflation. Only gold is not someone else's debt instrument. That is why governments are always at war with gold. A high gold price is proof they are doing a bad job with the economy.

Now days, money can be made with just a computer entry. Witness President Obama's Quantitative Easing 1 & 2 (QE1, QE2) The Federal Reserve Bank (a monopoly and cartel - not federal) prints and sells over $1.5 trillion dollars worth of bonds and gives the U.S. government the money. It won't work. The Greater Depression is in control. The Greater Depression started with the 2000 dot com stock bubble top and may last until 2018.

Inflation could ramp up to the moon if we let our governments keep borrowing and spending. I don't think it will in the next five or six years. The world has to go through a big deflation first to cure the excess credit inflation in the system. Money and wealth is already disappearing faster than governments can create it and the snowball of deflation will only pick up speed. The Austrian school of economics says all credit inflation bubbles end with a severe crash.

After 2016-2018, inflation could come roaring back. My guess it that it will. Unless gold is backing a private money system.

Most governments of the world including the U.S. follow Keynesian economic theory. It is a socialistic spending spree that Franklin Roosevelt started our country on. This means they will try and throw massive amount of money at the problem. This is what President Roosevelt did instead of letting business and free enterprise do the job creating and economic healing. Plus, Roosevelt outlawed gold ownership on April 5, 1933. That ban was not repealed until President Ford lifted the ban August 26, 1974.

Gold could go five thousand of dollars per ounce in a future runaway inflation government spending orgy. But only after the Greater Depression has it's way with the world. As far as gold and deflation in the Greater Depression, I expect gold goes back down to $500. Copper silver and platinum are industrial metals and will be quite weak in a deflation economy.

One of the best ways to judge if gold is over or undervalued is to compare the price per ounce to the price of a top notch men's dress suit. A great suit was a twenty dollar gold coin back in the 1930's. An Armani suit must be $1,250 here in 2011. Although, I haven't priced one lately.

Get gold as a inflation investment at the end of the deflation and depression. Don't buy gold at today's prices of $1,200 to $1,250 per ounce. This is nosebleed territory. The price is way to high.

Gold mining stocks are another matter when it comes to gold and deflation investment consideration. Although gold mining stocks are probably too high right now, you should be aware that Homestake gold mine stock went from $40 a share to over $400 a share in the 1930's. Why? Well. They were a safe haven an they were mining money. They could even pay their workers in what they were producing. You might want to look into the best gold mine shares at some point but only at much lower prices.

Did you know that the American Constitution says all money will be specie? No, not some alien hitching a ride on a spacecraft. Specie is gold, silver and copper coinage. Real money. The government has been violating its own Constitution for years. It is still in there. Look it up! More at my site.

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http://www.deflationeconomy.com

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Delwyn Lounsbury - THE DEFLATION GURU is an Eagle Scout.