Asset deflation looks imminent , so...GOLD A DEFLATION HEDGE?
You may have read "The Great Reckoning: Protect Yourself in the Coming Depression, " by J.D. Davidson, Lord William Rees-Mogg, 1994. The book argues that impending economic turmoil in the 90's is more likely to be deflationary, than inflationary (argues inflation option will turn out to be the more unpalatable alternative for govts).
Anyway, the book explores five historical credit cycles--i.e., from a liquidation of debt recovery phase, to a creation of debt, bubble phase which ends the day bubble bursts. According to the authors, the last great credit cycle ended 1929.
About gold:
1. "At the end of past credit cycles, the REAL price of gold has bottomed at or near the end of the credit cycle, then risen sharply."
2. "Five great credit cycles have come to an end over the past three centuries, the last in 1929. On average, the price of gold in REAL terms rose within four years of the end of the cycle to exceed its high of a decade earlier by 8.5%."
Eeeeeeerie.....given where the Dow and gold are trading now. |
