The Inflation vs. Deflation Debate Is A Distraction

by | Aug 16, 2010 | Forecasting | 22 comments

Do you LOVE America?


    This article has been graciously contributed for your reading pleasure by Kevin of and Neo-Survivalist.

    Ever since the current economic downturn started a few years ago, there has been a constant debate of whether or not we’re moving into an inflationary environment or deflationary environment. The argument has taken up much of our focus. The reality is that this debate is nothing more than a distraction to a bigger, harsher reality.

    The reality is that we’ve increasingly moving towards a complete loss of confidence in the system. By the system, I mean the economy as a whole and the “leaders” ability to manage it. The leaders include the politicians and the Federal Reserve. The economic situation is increasingly spiraling out of control – out of the control of the hands that believe the could control it. The examples are not far for us to see.

    First, the Federal Reserve has drastically altered its tone with regards to the economy recovery. The Fed has revised its economic expectations lower just in the last 2 months. Bernanke’s ridiculous “unusually uncertain” comments recently also reflected a shift from his constant pumping of the recovery for the previous year. Lastly, the Fed moved to restart the quantitative easing efforts – this was a complete admission of failure with regards to the effectiveness of their previous efforts to “fix” the economy.

    Additionally, you can watch the financial television channels just this past week to see more heated debates and “experts” fumbling to defend the Keynesian religion in the wake of deteriorating economic data.

    Of course, those of us who have doubted the ability of the government to fix the economy all along are not shocked. Those of us who have doubted are the same that have been preparing for what’s coming next.

    What’s coming next is a loss of confidence. Getting back to the initial point of this article which is that the inflation/deflation debate is a waste of time… we usually have this argument in the context of investing. What should we invest in if we expect inflation or deflation? Should we own gold if we expect inflation or deflation? The answer is yes. The reason: the coming loss of confidence.

    The reality is that we have both deflation and inflation. The incredible credit contraction that is happening in our economy is definitely deflationary. Consumer credit is plunging. To combat this Federal Reserve worst-nightmare, they print extraordinary amounts of money to attempt to stop the collapse. The result of the printing is a rise in speculative assets especially commodities. As the economy continues to worsen over time, we can expect more of the same. More deflationary realities in the economy and more inflationary responses by the Fed. As it becomes more and more clear that it won’t save us, the public will lose more and more confidence in our leaders – and lose more and more confidence in the dollar. As it becomes apparent that this isn’t your typical business-cycle recession, but still the early innings of an economic depression, you can be sure that the faith of the masses in the system will evaporate.

    This loss of confidence is what will propel the price of gold to the moon. There is no greater reason to own gold than the potential for a massive loss of confidence – regardless of deflation or inflation. As more and more people shift their confidence to the shiny yellow metal and away from the slick rhetoric of Bernanke and Obama, gold is going to explode.

    Gold, obviously isn’t your only answer, because as the economy collapses, there is great potential for civil unrest. Make sure you are preparing in other areas (not just financial) as sites like this one often encourage.

    Don’t get distracted in the constant bantering over things such as inflation vs deflation. Instead focus on the big picture and the incremental steps you can take personally towards self-sustainability and preparedness.

    Written by Kevin of and Neo-Survivalist.


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      1. Deflation on the products you don’t need, Inflation on those you do

      2. It is not just the USA economy, but the entire western world’s.

        You are correct in saying the inflation/deflation debate is merely background noise.

        The system is simply broken.  We know it, and TPTB know it.

        The scary part  is:   WORLD WAR,  is usually part of  TPTB’s solution, and then gold.

        Gold,  Guns, Grub…….don’t forget the ammo.

      3. so you can watch the end of the world – all caught in high-def, computer-enhanced, and color corrected. You can practically taste the brain matter…

      4. Yes, true, here in australia we see food going up, electricity, anything essential in fact. I heard a podcast explain it simply, when money gets tight more of that money is chasing the essentials than the luxuries, hence the essentials rise.

        Gold and silver are the obvious protections. My god, silver is still at or near its lowest price in the history of the world! You would be an idiot not to stock up physical silver at these prices.

        Luckily for us here, the world is full of such people. They will buy as we sell.

      5. Comments….. Good article. people need to remember, there’s nothing backing up the dollar but a small ammount of faith that the user has. That faith is eroding rapidly. people will look for something else to put their fath in—cha-ching. might be nice to get some gold and silver it seems… time is running out.

      6. Comments…..” As it becomes more and more clear that it won’t save us, the public will lose more and more confidence in our leaders – and lose more and more confidence in the dollar.”

        That we have already!  I have no confidence in our leaders, and the more I read comments at the end of news articles, it looks like the majority of the people are cynical and have no faith in our leadership or the economy.  Something will get the ball rolling.  Maybe the unemployed will get together and march on Washington, DC?  They will mobilize just like the tea party did.

        Right now we have cheap houses on the market and getting cheaper.  No one is really buying–too scared.  Credit cards are no longer being given out like candy, thus, making people live within their means.  Food is the one thing that people use everyday, and that’s gone up considerably.  Stock up now before it becomes unaffordable to eat.

      7. …..Where should I buy silver and what kind should I get? Like old quarters and dimes? and how much should it cost?

      8. Hello Kevin!

        I never heard from anyone else that we’d have both. But, I have come to the realization that we will. The total loss of confidence is what will be the most devastating. Thats when the riots, the hording, the crime waves, etc, will start. While we, the 3%ers are hunkered down, even now, waiting, the vast majority of the populace is simply believing the lie. though they think something is wrong with the lie, they don’t realize that the green shoots and summer of recovery is just another way to extend the racket for just a little longer. When that is realized that is when the SHTF and you better have a plan.

        And, guys, there are 6 Gs in that:

        God, Guts, Guns, Groceries, Gas and Gold.

        I believe that is in order of necessity. If you don’t have the first one, getting the second one won’t do you any good. If you don’t have the first and second one, getting the third one won’t do you any good and so on… You’ll need to learn to grow your own groceries and make your own power. I have a feeling we’re moving into a fairly dark time where the things we have grown up with are not going to apply anymore.

        Be sure not to neglect basice self defense.

        Growing up in a household full of guns I find it odd that people don’t have them, but, they don’t. If you can just get a simply shotgun, you are far better off than someone who doesn’t have one.

        Its not a good idea to neglect any part of the Gs. They are all important. Leaving one out will increase your deadness (that which is likely to make you dead.)

        Keep up the good work, Kevin. Many won’t listen and make their SHTF Plan, but, when it hits the fan, they can’t say we didn’t warn them.

        I don’t say much to people around me, though, some close friends know Krogers is suspecting I’m trying to compete with them. Remember, you don’t want too many people figuring out what you’ve got. As far as the neighbors know, I’ve got a few guns and some extra food in case I get snowed in. They don’t know I have more guns than many gunshops and that I have enough extra food to fill the bed of a pickup truck. Be sure to talk in generalities.


      9. I don’t know what’s going on.  I’m on a small island in the Pacific.  Nothing has changed here except more ‘budget cuts’.  I don’t even buy groceries or gas.  So, when I ask family and friends what its like in the States, they say everything looks as great as ever.  No price increases, city beautification projects, people shopping and eating in restaurants, etc.  They all think I’m crazy/stupid for believing as I do.  I see the news, read the articles, and I believe as ya’ll do; that things are going to get real bad, that the masses will never know what hit them.  I’m begining to think that most Americans don’t give a crap what happens so long as they still have TV and beer.


        In this collossal mess we’re all screwed in the long run.     It’s just that some will be more screwed than others.   You’re just buying time now so you don’t have to pay more for it later on is all.   Which is laudable.    But make no illusions here to yourself or others that any of us have the bull by the balls and will ride this out with nary a scratch because sooner or later you too will run out of stock in your proverbial survival silos.     And defending it from those without will be a nerve-wracking debilitating bitch in itself.         It will be plenty hard enough even on those who have ‘prepared’ – enough so that they will wish they weren’t around to witness it.

        No, there are no careless isles to be left here to enjoy at one’s leisure like it used to be.      It’s Hell’s Hurricane coming our way on a pale horse and indeed hell rides with him.    Maybe God is ultimately all you finally will  have left that have left room for him to begin with.   

        The Final Testing is about to be begin.

        Rich Halsen, I agree with what you said. That’s about what I’ve been thinking. It’s like the old joke about just being faster than the slowest one in the group when a bear is chasing you. You may save your skin on the first or second encounter.
        Only problem is (Extending this “bear” metaphor), when things turn bad over a very long period of time, there’s going to be a LOT of “bears” and they won’t rest and they’ll come from all directions 24/7.

      12. All i know is that what ever they decide to do is that we are all screwed. either way its bad for all of us.

        The day other Nations and people stop useing the dollar and instead start dumpng it  will be the demise of AMERICA !We have been living on borrowed time for a while. Bob chapamn said they would print up and inject 5 trillion dollars to keep the collapse from happening . Eventually all of this will have to be paid back by the tax payers  . They hope that somehow Jobs  and millions of them just show up to save the day .Well folks, its just not going to happen . Sad to say that our Govenment has Bankrupted the Nation while they enjoyed there wealthy life of luxery . The banking system is rigged.Everytime the banks loan out and lose their ass, when they get in trouble Uncle Sammy  Gives them a Bailout , its a repetitive process with no end in sight . They have us by the SHOTHAIRS 

      13. Don’t focus on the hired help, or another way don’t try to grab the belt while you are getting a whooping, only makes things worse.

        God is giving us what we wanted, a world without Him. He has let us elect “leaders” who can’t lead, and experts who can’t [you know] so we will get our craw full, and eventually get on our faces and repent {change our mind about} who we really want running things.

        Probably won’t happen though until we {most of us} have no where else to turn. There is no new thing under the sun…

      14. Comments….. Quick note in response to poster”me”, as to where to buy silver coins, and what type to buy.  I can tell you where I have had luck in my searhes. Try your local coin shops. Most buy and sell pre 1964 circulated silver coins, also call junk silver. When I purchased, I usually paid about a 14/1 ratio, or a 14 times face value, up to a 14.5 times face. I bought so much from the local coin dealer, he gave me his lowest price above spot, or melt value.  Most dealers buy for about 10/1, and sell for 14/1, or higher.  That spread is thier profit. Using that method of valuation, if you took a pre 64 dime to a dealer, he might give you a dollar for it, and sell it for $1.40, something like that.
              You can also do a search online, and purchase it that way. I use a company called  I have been buying there for over a year, and they have great prices, and good service.  I don’t have any connection to this company, other than being a satisfied customer, so I am not a shill for these guys. buy any where you want.
             I personally like dimes the best.  They are a small unit of value, and easily used for transactions, when the time comes, plus everyone knows what a dime looks like.
            Hope this helps, good luck in your search.

      15. Me,

        I also purchase from Gainesville Coins.  I’m very pleased with the service and price.  I plan to make more purchases from them.  As for junk silver coins, if you can’t find them locally, as is my case, try  They sell in small amounts, however, they have high premium.  If you can’t afford the larger quantities (like me), consider buying from them.  They sell in the 1/4 troy ounce on up.  Try local first, it’ll probably be cheaper.

      16. I have a question about the gold and silver comment. One of the articles said that you should figure maybe 4 times the amount for property taxes and have gold or silver for that. It stinks that you could have your place paid for and lose it for taxes. Just not right. But anyway, do you agree that you should have at least some put away for taxes? Or is it a lost cause.

      17. Good comments all.

        Jane: I was listening to Mark Levin (it could have been Mike Savage, I can’t really with certainty) a while back while driving through Texas scobing farm land… He mentioned that he had a neighbor on his street that lost his house. However, it was not because he couldn’t pay the mortgage. It was because the county raised property taxes by something like 50% which pushed him over the limit. He lost his house to the government. I suspect as governments continue to go broke, so will a lot of people who will see their taxes go through the roof. With sales tax or fee increases you could simply stop using certain services or buy less, but with property tax, you’re locked in with no choice. So, I guess my suggestion would be to have reserves for any possible calamity, including a job loss or rising taxes.

        RE: Silver and such:  I think all of the above mentioned companies are solid and have good reputations. With the internet you have the power to check prices across 4 or 5 sites.. while the spot may be the same, the premiums and shipping are different, so check several sites before you buy. Might I also recommend for purchases of junk silver, especially if you are on a tight budget. Buying quarters/halves on ebay is usually a good deal, as you can generally get those at right near spot price with very cheap shipping costs. I don’t know if I would buy gold or even large silver bullion on ebay, but quarters and halves are hard to counterfeit and usually come from sellers looking to pay rent or are in need of FRN’s for other reasons.

      18. Comments…..I’m not trying to sound like an advert for gainsville coins, but they sell bags of junk silver now in $100 face value bags.  This is more in line of affordability for the average person. I bought 2 $100 facebags today. The premium is very competitive, and is much cheaper than buying comparitive 1 ounce silver bars, or silver eagles.
            I like everyone reading this to get the most bang for their money. Again, I have no affiliation with these people, other than a repeat customer.  Do your own due digilence.  As mentioned before, many places sell at close to the same price, but the shipping varies greatly. I save on shipping at gainsville coin, as I pick the stuf fup at their retail location–nice. Good luck folks. Buy silver now, it won’t be this cheap again for a long time.

      19. And when they pump fake gold deposits into the system to artificially deflate gold, then what?

      20. “And when they pump fake gold deposits into the system to artificially deflate gold, then what?”

        We buy the real stuff, like gold eagles, for cheap!

      21. What a great article.
        The author hits the pithy points which center that at some time it sinks in to the main stream consciousness that there is a SECULAR change happening.

        When that occurs then yes, expect a loss of confidence in leaders, the dollar and the “system”.

        Preventing this very loss of confidence no doubt is one main reason we have seen the US Gov go into overdrive the last few years in attempting to spin a false truth. They’re lying their hearts out in an attempt to shore up the corrupt ponzi scheme of an economic/political system we have.

        As things crash (fast or slow I can’t say) then all matters deteriorate across the board. Prices on essentials, public services,  pensons. crime    etc. …likely they all go downhill.

        So will the “G’s” save you? Well, surely they can’t hurt. Something tangible, physical, sustainable is certainly preferable to pieces of paper (or digital counterparts) that say someone owes you.

        The question is… what lies beyond the meltdown.
        And the answer to that I think, is yet to be determined.
        For this is something that will be determined by how people handle difficult times, adversity, insecurity and gross injustice .

      22. Comments….. reply to steve:
        good observation. I think you hit on some good points.  If  you back up and look at this particular point in time we are presently in,to me, it resembles an expectant mother, who’s overdue for delivery, waiting for that baby to be born.  The doctor’s telling her to push, and she’s screaming in pain.  Everyone is waiting for the “event’ to happen.
           It seems that tension builds daily.  The MSM has to come up with ever more elaborate lies to prop up the new spin every day. I hardly watch national news anymore, as I already know what they’re going to say. It’s almost comical to watch them try to put “lipstick on a pig”, as they try to spin lousy economic data, and tell you we’ve turned the corner on this recession. Fewer and fewer of the sheeple out there are believing this drival as the days go by. It’s hard to deny what one sees every day as they go to work, or as in the case of thousands of people, what they see as they go to the benefits office to apply for aid. 
              As every aware reader who follows any of the thousands of blogs relating to prep out there knows, the meldown grows near.  The only question is what lays beyond. The bad thing is, none of the scenerios talked about are any kind of good.  The only positive thing we can do is keep preparing for a time when we see levels of pain that none of us have seen in our lifetime. I think everyone can sense that very soon, life will never be the same again. That may be as hard to accept as any other factor in the meltdown.
               There is power in prepping, and proactive measures. People need to understand, if we are wrong in our actions, no harm, no foul, but by doing nothing, disaster is assured. Good luck.

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