FOFOA converts another Deflationist!

Now if we could only convert Mish Shedlock. FOFOA is literally the “gold standard” on the issue of Freegold and hyperinflation. I discovered his blog 3 years ago and because of it decided that mining stocks, ETFs, and any other manner of paper was doomed to seek its intrinsic value, namely zero. I only use a small portion of my portfolio to utilize paper as a short term trading vehicle, all the rest is in physical bullion.

The problem with the deflation argument is that is mostly correct and intuitively plausible. The hyperinflation argument on face value is not so intuitive. It is because of the biases we bring to the table that makes it so. FOFOA strips the bias away and reveals what hyperinflation really is and what it means. There is a big difference from being mostly correct and being on the target when it comes to this argument. FOFOA has removed the veil from another set of eyes. You cannot know you are doing the right thing if you do not read and understand FOFOA’s argument for Freegold  and hyperinflation. 

Tuesday, April 26th, 2011

Finally, a Hyperinflation Argument That Persuades

So, it looks like I’m a hyperinflationist after all.  Reminds me of the joke about the cowboy who chats up a woman at a bar – a lesbian, as it turns out. She tells him she spends her days thinking about nothing but women. “As soon as I get up in the morning, I think about women,” she says. “When I shower, I think about women. When I watch TV, I think about women. I even think about women when I eat. It seems that everything makes me think of women.”  The cowboy goes home that night thinking that maybe he’s a lesbian too.  Another tavern, another night:  A stock broker strikes up a conversation with a stranger who seems obsessed with the idea that hyperinflation is about to wreck the economy. “From the moment I open my eyes in the morning, my head is filled with worries about how the financial system and the world’s currencies are hurtling toward disaster. Watching the stock market rise relentlessly, I grow more certain each day that it can only end badly.  I think the real estate disaster has barely begun and that, for tens of millions of us, the American Dream is about to turn into a nightmare.”   “Hmmm,” says the stockbroker.  “I guess that makes me a hyperinflationist too.”

And so it goes. A conversation between a hardcore inflationist and an equally hardcore deflationist might meander for hours without generating much argumentative heat.  That’s because both see the financial system in smoldering ruin after the smoke has cleared; it is only on the matter of how the disaster will unfold that they disagree. I’d thought until yesterday that deflation was far more likely to do us in, turning an endless Great Recession into a Second Great Depression. My scenario called for falling prices and wages, imploding asset values and an economy drowning in bankruptcies. Hyperinflationists are expecting a quite different endgame — one in which prices soar relative to fiat money, debtors pay off loans with confetti, creditors and savers are wiped out, and hoarders of bullion live like kings. I am now convinced, after stridently arguing the case for deflation since the late 1970s, that the hyperinflationists will be right.

Read the Rest of the Article

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