Mr. Puru Saxena owns a wealth management firm in Hong Kong and is a registered investment advisor and money manager. He has over a decade's worth of experience in our industry and in June of 2000 began to write his monthly newsletter Money Matters. No stranger to physical gold, helicopter money and it's results, he weighs in on the inflation/deflation debate. Here's how he started the above article: Now that almost every Wall Street economist is looking for the arrival of a Great Deflation, we think investors should begin looking the other way. Keep an eye out for inflation, we say.
Halfway through the excellent article he says this: All the popular deflation myths aside, the reality is that inflation is an increase in the supply of money and debt within an economy. Furthermore, the price increases often described as inflation are simply consequences of monetary inflation - a euphemism for the dilution of the money stock.
Look. Whenever any central bank creates new money and whenever any entity (individual, business or government) takes on more debt, the outcome is inflation. As Milton Friedman once said, Inflation is always and everywhere a monetary phenomenon.
Absolutely! As Puru nears completion, he says this: Today, under our fiat-money system, governments are willing borrowers and central banks are more than eager lenders (money creators). Under these circumstances, a contraction in the supply of money and debt (deflation) is out of the question. Conversely, given the short-sightedness of the politicians and their perpetual urge to kick the can down the road, the real risk facing the economy is extreme inflation or even hyperinflation.
I could not agree more! The deflationists are only arguing for more helicopter money! Remember what our Federal Reserve said earlier this week - more quantitative easing is necessary! My friends buy gold to protect your nest egg!