It is Keynes versus Hayek with an honourable mention to Marx...

It is Keynes versus Hayek with an honourable mention to Marx because Marx's idealism has a place in the social values of the left.

Keynes believed in doing whatever is necessary in terms of monetary and fiscal policy to keep aggregate demand up. Manifestations of his theory have popped up in the form of bailing out too big to fail corporations and quantitative easing where rates were set to zero, liquidity was provided to the banks and government spending increased to make up for a lack of spending by the market. The theory ultimately aims to circumvent the busts, recessions and depressions that were prominent with classical economies that were more rigid in their monetary and fiscal policies. Keynes' theories state that with navigation through monetary and fiscal policy an economy can control it's economic cycles.

On the other hand, Hayek believed that the cycle itself was natural and inevitable. More, his theory states that government intervention in either monetary or fiscal policy would just create inefficiencies and bubbles that would worsen the inevitable bust. Hayek believed that if the market could control itself then it would act in it's own best interest. Joe once said to me that trying to apply this theory ended in disaster. However, Joe's inference was immature as it was only the derivatives and CDS markets that were left unregulated whilst the world was practicing free trade, another hall mark of Hayek's theories. Hayek would have turned in his grave because his theory was about letting the market fix it's own monetary policy and to let corporations fail in favour of new fresh blood entering the market with a genuine competitive advantage rather than a shallow government given one, which is perhaps the hall mark of Marx's theory.

So what does this mean for gold?

Under the Keynesians, liquidity was given to the market in the form of bonds that span from a few months to 30 years. The printing presses have not been fired up yet. However, the debt has still been created and the countries who have gone the liquidity route have a maximum of thirty years to get aggregate demand up to the point where healthy inflation outruns the burden of the bond debt. After all if I owe a dollar and all of a sudden inflation goes up and I am now selling products for more than what they were worth yesterday I will have more profits and that one dollar debt is less ominous and even affordable. If however aggregate demand drops and inflation does not outrun the debt burden of the bonds then when the bonds mature the countries that have gone the liquidity route will have to fire up the printing presses and that act will result in hyper inflation. No offence to anyone but I believe that this scenario makes gold a young man's game. However, there is hope because despite the Keynesians best efforts aggregate demand is unstable and deflation is gripping the world. When all asset classes are threatened by deflation gold does seem to do well. Furthermore, deflation is occurring whilst the majority of first world economies run on zero interest rates. This has the potential to strike off several asset classes from the safe haven group of assets.

I just didn't want to leave you hanging. I have been a little offensive but I am open to ideas.