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dangerfairy (< 20)

Something I would really like to understand



November 17, 2008 – Comments (7) | RELATED TICKERS: GLD , SDS , USD

If deflation is the contraction of the volume of money and credit relative to available goods and gold goes down in deflation.


Why is it that the same people that believe this can also believe the dollar is headed for a collapse?


You can't have it both ways. Will the dollar have positive returns in a deflationary environment where the S&P loses another 30-50%? 

7 Comments – Post Your Own

#1) On November 17, 2008 at 1:51 AM, goldminingXpert (28.82) wrote:

No, the inflationists (read: "incorrect") believe the dollar will devalued or even turn into confetti. The deflations (read: "accurate" believe credit is contracting (and we already have proof) thus leading to a strong dollar (already happening)--not a collapse. Eventually if the debt isn't paid off, there will be dollar problems, but those are years off over the horizion. King Dollar is back for now.

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#2) On November 17, 2008 at 2:13 AM, DownWithInfidels (28.49) wrote:

To believe in deflation is to believe that the infidels in American government and federal reserve will not do very stupid and irresponsible things to ensure short term gains. That includes bailouts of every company possible, printing $US like toilet paper, even more than before, and going to negative interest rates!

I never underestimate the power of the stupidity of the US government and its people and so far I have been right!

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#3) On November 17, 2008 at 3:09 AM, starbucks4ever (88.63) wrote:

The essence of what's happening to gold is that is fails to increase in value as the rest of the world hyperinflates. Its price increases of course, but at a lower rate, so it fails to maintain its purchasing power over time. 


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#4) On November 17, 2008 at 3:23 AM, goldminingXpert (28.82) wrote:

zloj, the price has dropped from 1020 to 740. That's not a "price increase"... that's a 25% loss on your investment. However, ad you invested in King Dollar (+28% same time period), you'd be a happy man.

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#5) On November 17, 2008 at 3:34 AM, starbucks4ever (88.63) wrote:

I mean, increases over time (in nominal terms of course). One autumn does not a trend make. 

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#6) On November 17, 2008 at 5:12 AM, DemonDoug (31.17) wrote:

GMX: So i guess 7 years of solid inflation are wiped clean by, what, 5 months of dollar price appreciation?

Have you seen a MZM chart lately?

In the market at any time there are always inflationary and deflationary pressures.  In the short term either one can be dominant, but it is governmental policy that sets the standard for what the overall trend will be.

If you'd bought gold in 2001 you'd still be way ahead.  If you'd had cash or stocks you'd be even or down (generally speaking, not specific stock issues).

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#7) On November 17, 2008 at 7:02 AM, kaskoosek (30.21) wrote:

Gold is different from other commodities. It is usually not consumed, therefore in a depression it is not effected like other commodities.


The price of gold is based only on perception of its value. I really don't know what is its value.If suddenly everyone decides that they do not want to hold it anymore it could really go to the price of mining it or actually lower.



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