JohnL

John Doody: A Winning Situation for Gold Stocks

"It was Dr. Friedman himself who said the best way to avert another Great Depression was to sharply lower interest rates and print money like crazy. This is one point on which the Chicagoans and the Keynesians both agree."

The Keynesians and the Monetarists might agree, but they are not the only important schools of economics. The Austrians (Mises, Hayek, Rothbard, Hazlitt, de Soto, et al) are the only ones to show the true dangers of a credit-fueled boom and the reasons why the subsequent bust can't be averted with more easy money.

John Doody: A Winning Situation for Gold Stocks

"For three or four years prices were down about 10% annually. He fully understands the risks of that, one of which is the increased burden of existing debt payments on falling incomes. The debt burden is lighter in an inflationary environment and that’s his target."

The debt burden is lighter on the debtors but not on the creditors - for them it gets heavier as their asset prices drop and their coupon streams drop in real terms. There are two sides to this story, which is really a zero-sum game, is it not? If the government adds a new source of instability to the mix by ramping up inflation and dropping bond prices, I think the situation could get even trickier and probably worse.

Gold as a Truly Last Resort

"Gold was money for most of recorded history. That hasn't been the case for a while now and people are a lot more sophisticated than they used to be."

Dave W, you're right; people are a lot more sophisticated today. Many of them found employment at Countrywide, Bear Stearns, Lehman, WaMu, AIG, Merrill, Citi, Moodys, the Fed, Treasury, etc. With all of that incredible intellect running around loose, I think I'll hold onto my gold. It may just become money again.