WHAT IF DEFLATION WINS?

[The Following post is by the Hard Metals Team] Since writing last month that inflation was on the rise, things have taken an abrupt turn. Look at the deflationary actions that have recently taken place:
The US dollar has shot up The US bond market has rallied Precious metals prices have collapsed Base metal prices have fallen Stock markets have declined Oil and other commodities have fallen. Further, just last week the International Monetary Fund cut its global economic growth forecast for the third time this year. Why? It doubts how quickly “rich countries will be able to pull free from high debt and unemployment in the wake of the 2007-2009 global financial crisis.”
It’s hard to argue that high debt levels are deflationary. And with the current expansion based largely on debt, we can’t expect sustainably higher economic activity to be generated.
So what happens if deflation wins? Even if we eventually get inflation, what happens to our gold investments if we first go through a deflationary bust?
There aren’t a lot of modern-day examples of deflation. The Consumer Price Index (CPI), as faulty as it may be, has registered only three declines since 2000, and all were short-lived. The CPI fell:
August to October, 2006 July to December, 2008 March and April, 2009.

This post was published at Dollar Vigilante on November 8, 2014.