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Gold/Mining/Energy : Gold & Gold Stock Analysis
GLD 383.15+0.8%4:00 PM EST
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To: Aloysius Q. Finnegan who wrote (15803)10/25/2008 4:21:25 PM
From: Horgad1 Recommendation  Read Replies (2) of 29622
 
The Inflation/Deflation debate has practically become a religious choice. Most people chose their camp a while back and for the most part are holding fast. So lately, I have not seen much productive discussion on the subject.

Deflation:

Massive destruction of debt (bursting of the U.S. housing debt bubble) will cause deflation.

Inflation:

Deflation can not happen in a country with a FIAT currency, a trade deficit, a horrible balance sheet, and a bunch of officials willing to print unlimited amounts of money.

Right now the deflationists, obviously, have the upper hand and the inflationists have changed their tune to:

Deflation can not last long in a country with a FIAT currency, etc. Any short lasting deflation is simply coiling the spring further and setting us up for a coming inflationary moon shot.

Pick your poison.

Personally, I think the circumstances in the U.S. are fairly unique and that there are just too many variables to 100% predict inflation versus deflation. However my gut is telling me that the one pillar left that is holding up the US dollar is crumbling (reserve currency status) and that once it falls we whipsaw from deflation to hyperinflation.

The setup right now is perfect. Everybody into the dollar than boom!
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