Gold, Austerity and Deflation

"Gold got whacked 39 points to 1206 but still above 1200. Gold is looking at deflation. Be sure to read my explanation on tomorrow's site."

I hate to see gold associated with deflation in this manner. Gold is looking at deflation? No way, gold's whacking was nothing more than a paper operation that capitalized on a thin market looking for an excuse that could be parroted on F-TV. To link the gold's decline with deflation implies that the U.S. dollar provides a stable reference point despite unofficial neglect and constant devaluation since 1971.

We should be asking what's the political half-life of austerity intended to strengthen the currency when the economy is clearly weakening? Austerity and balanced budgets were adopted early on in the Great Depression. They worked so badly that Roosevelt, acting against the consent of the majority of economists, removed gold from circulation through Executive order in 1933 in order to devalue the dollar in 1934.

Promotion of austerity now will only accelerate the onset of another Great Depression.