Inflation v Deflation Definitions

Question: if the world goes into deflation around the 2016 date, how will commodities

                 rise??  ( hoarding ) How will they pay the mines without a money system??

Gold-Fluctuated

Answer: There are several types of inflation such as:

  • (1) currency inflation whereby prices rise NOT because of an increase in money supply, but a decline in value of the currency on world markets (i.e. G5 manipulation of dollar 40% lower in 1985 led to 1987 Crash & capital flight back to Japan creating bubble there);
  • (2) capital concentration into one sector causing bubble which can be
    • (a) purely domestic or
    • (b) inspired internationally with rising currency as was the case in Japan 1989 or USA into 1929; 
  • (3) the classroom plain vanilla idea of a rise in prices with an increase in in money supply such as
    • (a) sudden discovery of gold in California, Australia and Alaska during 19th century, and
    • (b) the import of gold and silver from America into Europe by Spain that created wholesale systemic inflation in all European economies, and
  • (4) commodity inflation that is caused by a drop in supply such as food due to weather or exhaustion of resources
  • (5) money supply remains unchanged, but the VELOCITY increases from leverage (i.e. lending).
  • inter alia

Deflation is likewise multidimentional

  • (1) the classroom version of a decrease in money supply;
  • (2) failure of money supply expansion to match increase in demand for money
    • (a) as in deleveraging during economic decline as VELOCITY collapses and thus even QE1, QE2, QE3 failed to produce inflation because they were less than the destruction of capital from deleveraging
    • (b) the classic contraction in money supply during economic declines relative to the shift in demand from assets to liquidity
    • (c) rise in the demand for money outpaces the available supply as in flight to quality
    • money supply growth falls below economic expansion
    • money supply growth falls below population expansion (more people making due with the same amount of money)
  • (3) contraction in available capital due to rising costs private or public
    • (a) from sudden price sock as in OPEC during 1970s creating STAGFLATION
    • (b) sudden rise in taxation causing decline in VELOCITY of money
    • (c) confiscation of assets by regulation
    • (d) historical forced loans,
    • (e) criminalization of normal human activity to confiscate assets as penalty under pretense of law
  • (4) in a precious metal money supply the debasement of new currency causes Gresham’s Law whereby the the older money supply is then hoarded thereby shrinking the TOTAL supply of money
    • (a) this causes prices to rise in terms of the debased new currency ONLY creating an admixture of inflation (rising prices systemically) coinciding with a deflation caused by the contraction in the TOTAL available money supply
  • (5) collapse in government / rule of law causes wealth to shift and concentrate in tangible assets (flight to quality) that survives the transition to a new government and monetary system
    • (a) this is normally associated with a collapse in the legal tender status of money whereby government no longer accepts its own currency in payment for taxes
      • (i) as was the case in Rome
      • (ii) Japan constantly demonetized previous currency or devalued it by a factor of 10 causing wealth to hoard in tangible assets and barter to emerge as rice displaced coins for 600 years because of devaluation by government
  • inter alia

TaxCollectorBar

How will they pay the mines without a money system?? This assumes new production continues whereby prices can rise BECAUSE the production fails to keep pace with the increase in demand, similar to a weather crisis causes food prices to rise. Gold can rise during a deflationary crisis WHEN the crisis is in government and thus when the flight to quality shifts from PUBLIC (cash) to PRIVATE (assets). We are facing the CONFISCATION of assets similar to Japan’s devaluation of outstanding money supply. This because a variety where MONEY loses its legal tender status and is no longer acceptable for the payment of taxes and thus taxes take the form of “in kind” meaning they just take property as in Cyprus or M.F.Global. There are numerous other dimensions to this question that will be addressed in a more authoritative writing. We have cataloged virtually every crisis and the various schemes employed since the dawn of civilization.