Deflation, Inflation, Twist And Shout
The gold and silver prices have fallen off the cliff. The reason? ‘Operation Twist’ has roused deflation fears. But what is deflation really? Is it simply falling prices? Commentators cite falling housing prices, declining energy prices, weak consumer demand and numerous reasons. Here’s how I see it.
There are several possible definitions for both deflation and inflation, with these three being the most common:
DEFLATION
1. Declining price
2. Lack of credit
3. Contracting money supply
INFLATION
1. Rising prices
2. Loose credit
3. Expanding money supply
Austrian sound money economists teach that real deflation occurs only when the money supply shrinks, eventually manifesting itself in lower prices. Conversely, real inflation occurs when money supply expands, eventually manifesting itself in higher prices.
Despite news of the day and Federal Reserve announcements du jour, the money supply is increasing. Despite what is happening with price action now, inflation will eventually prevail. Stay the course. Add to your holdings at these bottom-feeding prices.
All Things Considered – John’s Commentary:
People call me constantly, trying to make a decision, and ask what I think the market is doing. My best answer is that I’ve watched ALOT of investors, and the successful ones don’t hesitate. They decide what price they are willing to pay and buy and take the consequences. In the long run they don’t regret it.
Several years ago I was sourcing gold for a client when gold has risen to $820. He had asked whether it would correct to $750 or so. Would you buy gold at $820 today? From that perspective, that $70 didn’t amount to anything! He bought at $820 and is happy he did so.
Remember that you are buying gold and silver for the long run – for the BIG run up! Expect little price fluctuations such as these – and YES, they are little in the big scheme of things. They will pass quickly and you won’t even remember this price dip.
Understand that the long term outlook for metals is being strengthened through these price corrections – they are NOT being weakened!
Action to take: Pick your price and buy. These are AMAZING buying opportunities. Gold and silver WILL rise in the long run. If you have been considering swapping, the Gold/Silver Ratio rose above 58 yesterday. Don’t miss the swap window – it can close quickly!
Quote of the day: “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.” – John Templeton
