Calvin Oh

Gold Even More Attractive as Cash Yields Approach 0%

Do you really believe those numbers?

I don't think you understand the concept of real yield. 2-3% yield on an instrument does not take into account inflation.

And I think we need to clear up the use of deflation and inflation if we are going to toss those words around. You are referring to deflation as price depreciation. What we had was a historic credit expansion and credit collapse. Assets were sold by over-leveraged institution to meet liquidity and margin requirements. This led to a wholesale panic out of most assets, which went into dollars for a few reasons (of many).

1. As I mentioned, it is the best of the worst (out of all the currencies)

2. It is one of only a few markets large enough to sustain such a large amount of surge buying. (Any other market would have gone into a moon-shot)

When I refer to inflation, I refer to it explicitly as a monetary phenomenon which always eventually translates into price inflation. If you take a look at the amount of money that has been created over the last few months, the only conclusion you can come to is that some of that money will eventually hit the streets (and some of a grossly humongous amount, equals a very large amount) and cause an upward spike in price inflation. The only reason you are not seeing it now is because the money is not being released from the balance sheets of the banks because they are refusing to lend. This is exactly what happened during the Great Depression. As it is the Feds mandate to get this credit freeze thawed and money flowing again, the massive money printing operations will eventually translate into hyper-inflation, which will result in the collapse of the dollar. At which point the dollar will either be replaced or propped up in some hybrid form. (several years from now?)