The stock markets were down today as gold set another new record approaching 1300/oz. Treasury bills are also trading higher pushing interest rates down further. The wisdom coming from the pundits is that the Fed expects deflation to take hold and this is putting a chill into the air. Perversely the specter of deflation is being used to inflate the price of gold. Gold is not a hedge against deflation, gold is a commodity and will go down in a deflationary environment. Treasuries are denominated in dollars and deflation would make them worth more.
Gold is a hedge against hyper-inflation but with 95% of the money in circulation tied directly to debt instruments and most of those are on the verge of default, so the likelihood of inflation is next to impossible. Many trillions of debt are already in default but are being propped up by unrealistic accounting rules and a “aren’t the Kings new robes wonderful” attitude adopted by the Treasury Dept, the Federal Reserve and the 13 biggest Wall Street banks who control 2/3 of banking assets.
pictured above and on the left (but not really): Larry Summers
on the right (far right) Jeffery Immlet