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Why is deflation
bad? If one can manage to keep one's job and one has some savings, deflation
is the greatest thing since sliced bread. Stuffing cash under the mattress is
actually profitable during a true deflation, as the prices of most goods fall
during deflation. Why exactly then is deflation bad?
Deflation is bad for debtors and bankers that have made loans on assets that
are declining in value. Debt increases in its relative burden during
deflation, as a $100 debt is a heavier burden on the debtor once money itself
increases in value and the debt must be repaid with more valuable money. For
bankers, deflation means too many defaults and too little money recovered
when the assets backing debts-gone-bad are liquidated.
One of the hilarious and clearly fallacious arguments from those aboard the
paper fiat economic train to hell is that a Gold standard is too restrictive
and prevents "adequate" monetary expansion. This, it is so
postulated by the people who pretend to know, is bad and results in satanic
episodes of deflation. In other words, if we had a Gold standard, savers who
didn't want to take risk in the asset casino markets would be periodically
rewarded by having their savings increase in value. The horror!
Now, please don't misunderstand me - I am not saying a Gold standard is the
answer to the world's problems. Far from it. But to say that a paper fiat
system is the best we can come up with is so ridiculous that it is only
worthy of rebuttal because no one seems to want to let the emperors know that
they are not only naked but ugly and incompetent. Economics has become a
political science disconnected from reality. Should the mighty wizard of a
private central bank corporation pull the lever slow or fast - should they
push button A or button B? People honestly and truly believe that central
bankers set short-term interest rates and control the bond markets! This is a
really bad joke and as untrue as any of the other myths about financial
markets and our monetary system.
The reason deflation is feared and even hated is because the study of
economics is perverted by the thoughts and desires of banking interests.
Bankers hate deflation because they have a hard time making money during
deflation. Again, I am not saying that deflation is a desirable situation,
but to pretend that it is worse than inflation is not only dishonest, but
absolutely false.
Inflation benefits those with assets and debt, because assets increase in
value as currency is debased and debt can be paid back with devalued
currency. Deflation benefits savers and anyone else who holds cash. In a
"modern" fiat system, deflation is death because every unit of
currency brought into existence is a debt.
Those who want to live beyond their means and extend themselves financially
benefit from inflation because inflation bails them out of their debts (much
like a bull market bails you out when you time your purchase wrong). In a
sense, inflation allows us to live "the dream" that we cannot
afford. I am not saying this is a bad thing, but people who want to live
prudently and within their means are punished by inflation because their
savings decline in value as currency is debased. Conversely, those who live
beyond their means are punished by deflation while savers are rewarded. In
other words, deflation and inflation reward and punish different groups but
to say one is bad and the other is good is economic bigotry.
In the end, bankers hate deflation and thus the field of economics hates
deflation. It really is as simple as that when you understand who sanctions,
edits, approves and publishes the economic textbooks that make their way into
the schools of developed nations around the world. This is not a conspiracy
theory, it is a true conspiracy embraced by economists who want to make a
living just like everyone else. Paul Krugman was actually given a Nobel Prize
in 2008 - need I say more?
Just because deflation and bankers mix like oil and water doesn't mean that
deflation is bad. It just means that a modern fiat paper money society
ridicules savers and glorifies debtors. You gotta bring, bring the bling,
bling to get respect 'round here. Up is down and right is left - which part
don't you understand?
Physical Gold is a vote of no confidence in the current state of paper
affairs and is the easiest, no-brainer investment out there if one is willing
to price things in Gold rather than paper fiat units. Stocks, corporate
bonds, real estate and commodities will continue to decline in value relative
to Gold in the longer run (short- and intermediate-term swings aside). I also
believe Gold will continue to outperform paper cash over the next few years
as a critical mass of people begin to question how a government can create
unlimited amounts of money to service the so-called "needs of the
people." Gold is debt-free money and nothing else. Gold is not a
get-rich quick scheme, it is a way to save money while the paper fiat edifice
erected over the past 38 years is burned in effigy.
Adam Brochert
GoldVersusPaper
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