Deflation, Inflation And Gold

Date: 24 Oct 2015

Below is a very interesting article and reinforce my believe that gold could be the bright spark in the coming years.

Within 2 days we have seen The ECB  (European Central Bank) maintaining its rates and hinting of further QE by year end if the EU remains in a state of low growth and low inflation, and the PBOC (People’s Bank of China) reduced the interest rates by 25 basis point and cut the reserve ratio by 50 basis point. Japan, despite it efforts, still had not seen signs of inflation hitting its target of 2%, and would likely see further easing in the coming months. With a so much money supply in the world, we could potentially see a deflation. The only way to combat deflation is to have inflation.

The article below highlights the importance of the velocity of money and what role it plays in inflation. For that to happen, the velocity of money must be in positive territory. But it is not. So inflation is not happening in the US. With more than US$4T printed since 2008, the Federal Reserve needs to cut the supply of money. They need inflation to do that (as explained in the article)

What is thought provoking is that the Federal Reserve could spark inflation by reducing the value of the US$ through another series of easing which in return could cause a rally in the rice of gold or invoke a policy to raise the price of gold to astronomical value and cause inflation which had happened before in in US history.

Hope you enjoy the article. I certainly do!



About The Author


Author of the books “Invest In Foreign Shares!” and “Invest In REITs!” both books are available at Popular bookstores “Invest In Foreign Shares!” reached Popular’s top 10 bestseller in August 2014 in the non-fiction category

Leave A Response

* Denotes Required Field