A Quote by Nicholas Deak
In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation - and we know that inflation will continue.
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The unique aspect of today's monetary inflation is that it is not limited to one country, but a host of countries are all inflating together. As a result of the monetary inflation (when all of the newly created money begins to leave the banks and enter the system), the price inflation will be worldwide.
We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation.
Over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity.
The price of gold was fixed at $35 an ounce in 1934, but by the time the U.S. got through the Korean War, the Vietnam war, with all the associated secular inflation, the price level had gone up nearly three times.
The essence of the problem is that the war against inflation is over, ... Ever since 1979 the Fed was fighting a war against inflation, and you always knew which way you wanted the inflation rate to go over the long run -- down.
The idea that when people see prices falling they will stop buying those cheaper goods or cheaper food does not make much sense. And aiming for 2 percent inflation every year means that after a decade prices are more than 25 percent higher and the price level doubles every generation. That is not price stability, yet they call it price stability. I just do not understand central banks wanting a little inflation.
I think democracies are prone to inflation because politicians will naturally spend [excessively] - they have the power to print money and will use money to get votes. If you look at inflation under the Roman Empire, with absolute rulers, they had much greater inflation, so we don't set the record. It happens over the long-term under any form of government.
When they say inflation is bad, deflation is good, what they mean is, more money for us 1% is good; we're all for asset price inflation, we're all for housing prices going up, and we're all for our stock and bonds prices going up. We're just against you workers getting more income.
Getting back to inflation, it is important to note that the producer price Index does not reflect wage pressures - and that is where the inflation threat really lies.
What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.
Thirty years ago, many economists argued that inflation was a kind of minor inconvenience and that the cost of reducing inflation was too high a price to pay. No one would make those arguments today.
If higher unemployment is the price we have to pay in order to bring inflation down, then it is a price worth paying.
Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying.
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
If government manages to establish paper tickets or bank credit as money, as equivalent to gold grams or ounces, then the government, as dominant money-supplier, becomes free to create money costlessly and at will. As a result, this 'inflation' of the money supply destroys the value of the dollar or pound, drives up prices, cripples economic calculation, and hobbles and seriously damages the workings of the market economy.
Every time the Fed implements 'quantitative easing,' a.k.a. printing more money, two things go up: taxes and inflation. When taxes and inflation go up, more jobs are lost.
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