Tuesday, October 7, 2008

Catastrophe Hedge

For another reason to own gold listen to this James Turk interview on BNN where he tells you gold is not just an inflation hedge but a catastrophe hedge as well.

He has some nice insights on deflation as well. Specifically that the current stock market crash is not asset deflation, but its wealth destruction and don't confuse the two. He is dead on, remember that inflation and deflation on monetary events, prices going up is not inflation nor is prices going down deflation. Inflation is an increase in money supply and deflation is a decrease in the money supply. Just because people stop spending the extreme supply of money in the economy doesn't mean that deflation has set in, that doesn't happen until people burn their dollars thereby decreasing the money supply.

3 comments:

Victoria Hokulani said...

No one is burning their dollars but they are pulling them out of the system and stuffing them into First Bank of Sealy! Yes, there is wealth destruction, but WHY? Is it intentional? Does it have to do with demand destruction? Peak Oil Doomers say that this is all planned to create demand destruction. I would love to hear you theory about why there is such massive wealth destruction.

Anonymous said...

The money supply includes other forms than just cash. Credit is part of the money supply, and credit is being destroyed very rapidly, in fact much more rapidly than the cash is being printed.

mikeyaustudent said...

Inflation is properly defined as any increase in the supply of money that exceeds the demand for cash holdings. This last bit is important,ignore it at your peril.