Deflation Dollar Panic - No, Chicken Little, the Sky is Not Falling

Some, who are passionate about a deflation in dollar prices, are in a panic today.

Seems there have been rumors about the petro countries getting out of dollars. Supposedly secret meetings are occurring. In short, everyone is fed up with Bonzai Ben Bernanke and wants to unload their dollars for "real" money. Or so goes the rumor.

What is not rumor is that the dollar is going down at this moment. If the dollar depreciates relative to other currencies,  usually this means prices in dollars will go up. In other words inflation. Hence, the fear of deflation advocates. If you have inflation, obviously you're not having deflation.

One deflation newsletter today, to Guido's knowledge, has posted two articles denying this will happen, almost boarding on hysteria.

Well relax, you weak sisters, the dollar won't collapse today. Because it's already been collapsing over the last hundred years.

Since 1910, the dollar has lost over 98% of its' intrinsic value relative to goods and services. This has enriched the wealthy and demolished the middle class / income segment of the population. With the demolition of the middle class, democracy and basic freedoms are disappearing.

Coincidentally or otherwise, this all seemed to occur around the same time the Federal Reserve was created in 1913 to be America's "currency guardians". Now whether this is cause and effect, may be open to debate. But if anyone thinks the Fed or other Central Banks will be abolished, they are living in a myth. Like the Mafia, flu, and child birth. Like death and taxes, Central Bankers will always be with us, for better or worse.

The focus of people should not be on getting rid of Central Banks, but on getting better Central Bankers.

As for inflation / deflation this century, just look at the price of gold. It is up over four times in price from what it was at the turn of the century.

Various reasons have been given for this. But the simple explanation is that gold has become a substitute for currencies as a store of value. It's illogical and doesn't make any sense. But then it even makes less sense to  have any confidence in Bonzai Ben and his ilk.

Is this the time to buy gold? Right now, Guido wish he knew that for himself . I do own gold, and have been in and out of gold this whole century, trading with that 400% move up, and sometimes getting out when the price contracted. But never selling short and always getting back into this investment.  Right now I am not buying gold, because I already own it and am enjoying the paper profits.

To make money in a speculation / investment, one should be putting their bets down before the investment starts moving up, and especially before everybody starts getting excited about it. That's when the easy money can be made. And that's why gold was such a sure thing at the beginning of this century.

Right now, Guido is having trouble finding any more easy money. Perhaps, as some assert, this is because the Central Bankers have so messed up the markets. If so, it will pass.

As soon as that opportunity comes and Guido has put his money where his mouth is, I'll let you know dear friends.

"I got across Europe and came to America because I had a pocketful of gold coins." - A farmer in Wisconsin who immigrated after World War II.

< As always, this article is for information purposes only. It is not investment advice or in any other way a recommendation. Please read the disclosure at the bottom of this web page. >