Inflation verus Deflation

Many argue that depressions cause deflation.

I argue that they can, but it can also cause massive inflation. The centralized response to debt creation and destruction process creates either inflation or deflation. If protection of the system jeopardizes confidence of the money issued by the system, subjective theory of value (money), the end result will be inflation depsite the deflationary bias of a debt collapse.

The centralized response reflects deteriorating confidence in terms of rising gold and commodity prices (charts below) since 2000. The outperformance of gold relative to all asset classes reflection the increasing rate of confidence deterioration.

Gold, London P.M. Fixed:


Spot Commodity Prices: CRB Spot Index (1947 - Present);
16-Raw Industrial Spot Price (1935-1947);
Great Britian Wholesale Price of All Commodities (1885-1935)