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Deflation vs Inflation

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The Robs present a good discussion on this, but I think they're still missing the bigger picture.

The economic system we have is a form of legalized theft and is “the biggest scam in the history of mankind.” -Mike Maloney. We don’t have real money in the UK or anywhere in the world, we have fiat currency – money that is created out of thin air and that’s not backed by anything. Our governments have debased our currency and this is not something new – it has been done many times before in history and each time it’s been done before that nation has collapsed. Now the whole world is following this fraudulent economic system. The system is finite and will have to come to an end – it’s impossible for it to carry on as it is.

John Maynard Keynes, whose theories most of the world’s economists follow, put it this way: “By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”

So we need to get rid of Keynesian economics and this awful fraudulent system that is the real reason the rich are getting richer and the poor poorer, and go back to sound money that is backed by gold! The reason that the house you bought for £165,000 in 1997 is now worth 2.1 million is not that the value of the house has increased so much. It’s that the pound has lost its value. Real money: gold and silver, on the other hand, retain their value. 3000 years ago a horse imported to Israel from Egypt was 150 shekels of silver (about 1.7kg) – 1 Kings 10:29. With a quick search online I found a horse for £1,400 and 2kg of silver for £1363. Today you need more silver to buy a horse than you did 3000 years ago, probably because silver is quite cheap at the moment. But the values are still reasonably similar in silver over three millennia, because silver is real money and retains its value, whereas the pound is fiat currency and doesn't retain its value. The whole boom/bust cycle is due to this fraudulent economic system. With sound money backed by gold we would only have small amounts of inflation and deflation following supply and demand.

This is why personally I'm not investing for capital growth, but for cashflow – because I think the whole system of fiat currency has to come to an end soon.


Mike Maloney explains the system really clearly in this video:



And how the USA is making the same monetary mistakes as Rome did in this video:



The Mises Institute is also a great one to follow for economics:




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That assumes that gold, or silver, has an inherent value, which it doesn't. The only value it has is in what other people will trade it for. People will buy gold either to display their wealth or because they believe it is a good way to store it. But you can't eat it, you can't live in it, you can't even make much with it (apart from some bits in electronics). It's only value is because it's rare - Napoleon used it for his 'cheap' cutlery, saving his aluminium cutlery for his distinguished guests. 

I personally go for cashflow as well, but not because I don't believe that property is a store of wealth. I just don't want to speculate on it beating inflation and then having to sell the asset to realise it. I'd rather have the cash each month that I can trade for what I want/need. If you believe the economic system is liable to collapse, even cashflow is pointless, as there's no way rents would rise quickly enough in hyperinflation and if property values plummeted, why would anyone rent? At that point, rent to rent is the only strategy that would have made sense, as you'd get the cashflow now with little investment and them walk away when it all collapses.

I think if you want the growth, an ISA/pension is probably better, as it'll generally outstrip inflation as well and doesn't have the purchase costs or CGT liabilities. You don't get the leverage, but I suspect they win anyway.

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Yes, gold's value is that it's rare, but also that it meets the definition of money, and it has been used as money for thousands of years. The definition of money is something that is portable, durable, divisible and fungible (interchangeable), and that it is a store of value over time. Gold meets this definition. It's the same wherever it is on earth and it buys the same amount of things wherever you go on earth. It's portable - easy to carry. It's durable - the same gold in circulation today was in circulation thousands of years ago. It's divisible - you can make change with it. Because it's limited in quantity it retains its purchasing power - governments can't print it. There have been many fiat currencies in history like we have today that are not backed by gold, and they all return to zero eventually - it's a 100% failure rate. Currency - our pounds - don't meet the definition of money, because they don't store value over time. The more the government prints money, the more wealth is continually transferred out of our pockets to the government and the banking system, robbing us of our hard earned currency.

I think everyone should invest in gold and silver, because it retains its value. Then when the system collapses, exchange your gold for land and property. I think the system will collapse, but then it will restart again, hopefully with a monetary system that is not fraudulent - with real money backed by gold. Then there will be just small amounts of inflation and deflation with supply and demand. There won't be any more boom/bust cycles, which are caused by the fraudulent system we have. Property is always a good investment in the long term and there will always be renters.

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Gold has absolutely no intrinsic value, other than people have been attracted to it for years. In the event of total Armageddon, clean water is likely to be worth more as one will keep you alive, the other will make shiny trinkets. 

Plenty of people invest in gold, so you're not alone, but you're betting on a total crash of the system. If that doesn't happen, you'd have been far better off with a tracker fund and property. If it does, well your gold will be worth more than Apple shares and a terraced house in Middlesbrough, but there's every chance the future would bleak there was nothing you could do with anyway. Although I suppose you could fashion a crown for yourself

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