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Why Inflation vs Deflation Is Missing The Point

11 April 2011 2 Comments

With precious metals surging and mainstream Americans being forced to acknowledge the threat of inflation (after having their heads in the sand for years), the topic of inflation is on the lips of many. For years, the debate has been whether we’re going through inflation or deflation. The question doesn’t tell the whole story, because you need to clarify the currency by which we might be inflating or deflating.

The reality is that we are going through massive deflation when things are priced in sound money. Things are getting cheaper if you price them in gold or silver. You can buy a house for far fewer ounces of silver and gold than you could a few years ago.

Or how about the stock market? Here’s the S&P 500 priced in silver:

S&P 500 Priced In Silver

Yes, we have inflation.  Yes, things are getting more expensive.  But, only in dollars.

Why?  Because dollars are being debased.  Our burdened economy is actually getting cheaper which is the normal market response for an over-indebted economy due for a correction.  It’s getting cheaper in real money.

Makes sense?


  • xfiltrate said:

    Yes, what you have stated here does make sense and it also makes money, I think?

    Let me explain, about 7 years ago we bought silver and gold shares with X amount of dollars (GLD) and (SLV). Recently we sold half of the SLV and GLD for U S dollars and purchased 2 expensive motorcycles, that get 80 + miles per gallon, and will retain their resale value for many years.

    The remaining half of our SLV and GLD, purchased 7 years ago, is currently valued at the same X amount of dollars we originally invested 7 years ago. Go figure? My question is what has happened to the purchasing power of the remaining half of our SLV and GLD investment if we sold for today's U S dollars?

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