How the Dollar Affects Gold Prices

Interview with Jim Puplava, by Jeff Clark, Casey Research

Jim Puplava has robust convictions….The CEO of Financial Sense News Hour, Jim is a man you should listen to carefully if gold factors in your portfolio or if you are thinking about adding gold anytime soon. In this interview, Jim talks about how the dollar affects gold prices. He discusses whether we are moving into a phase of deflation or inflation and gives his views on what exactly that will mean to gold investors. He discusses the likely impact of inflationary or deflationary forces, which one he believes will win out, and the effect it will have on our economy.

Finally, he makes a very interesting prediction.

Of course, any investor will tell you that deflationists and inflationists have been arguing for years. Each side has data to back up its claims, so investors end up none the wiser and non the wealthier. All the arguing simply causes confusion, and that invariably that leads to inaction.

One thing they can’t argue about though: A defining moment in the deflation versus inflation argument will present itself when our current overburden of debt finally blows up. On the one side, deflationists will point to periods in history where deflation resulted from that overburden. But as always, there’s more to the argument.

Jim emphatically states:

“The outcome depends on whether or not the economy is operating under a fiat currency system, because there’s never been a deflationary depression when one’s been in place.”

Interesting.

When I saw this claim, I wanted to hear more, because deflationary forces seem strong at the moment. I asked Jim for a chat about his viewpoint. I wanted to get as clear as possible as I could about Jim’s thoughts on deflationary pressures, because it has direct and significant implications for investments, including gold, something all my readers care deeply about. Here’s my candid interview with Jim. [Read more...]

What Happens to Gold if We Enter a Recession or Depression?

By Jeff Clark, Casey Research

Mayan prophecies aside, many of the senior Casey Research staff believe that economic, monetary, and fiscal pressures could come to a head this year. The massive buildup of global debt, continued reckless deficit spending, and the lack of sound political leadership to reverse either trend point to a potentially ugly tipping point. What happens to our investments if we enter another recession or – gulp – a depression?

Here’s an updated snapshot of the gold price during each recession since 1955. [Read more...]

Stagflation – What is it?

What is Stagflation?

The simple definition of Stagflation is a “stagnant economy coupled with price inflation”.

Thus the term Stagflation… it has nothing to do with Deer.

In other words, in stagflation prices are going up while the economy is going down.  The word was coined during the inflationary period of the 1970′s.

StagflationUnder normal conditions one would expect inflation to heat up the economy i.e. increase buying demand.  That is one reason the FED generally increases interest rates during periods of higher inflation. This helps to cool the economy and prevent inflation from spiraling out of control.

Of course ,if you have read other articles on this site, you will know that the primary cause  of inflation is an increase in the money supply.

So clamping down on interest rates is kind of like stomping on the accelerator with one foot (increasing the money supply) and stomping on the brakes with the other (increasing interest rates).

The net effect is not good for your car. In the same way it doesn’t help the economy either.  But we digress (back to stagflation).

Remember, under normal circumstances increasing inflation equals [Read more...]