i know silence is golden but, page-6

funny how sentiment changes.

It starts slowly and builds.

Most folks started buying gold as a hedge against inflation.

They swallowed the line in the 'mainstream' media that with all the money printing and massive stimulus packages being implemented worldwide,inflation was a certainty.

Even Hyper-inflation!

Now the articles are appearing contridicating this thinking.

Deflation will be the major concern going forward.

Gold will not be viewed as favorably early in the deflationary cycle,maybe towards the end,but not at the start is my WAG.

Deflation article in todays Brisbane paper follows on from the earlier AEP deflation article in the UK Telegraph.

Watch to see how quickly this starts spread thru the mainstream media.

Inflation fears deflated as economy determines value

INFLATION is a scourge that destroys value, distorts decision- making and leads to higher interest rates.

One of the greatest fears of many economists coming out of the global economic crisis is that so much money has been pumped into the world economy inflation simply has to rear its very ugly head. But the facts suggest the inflation story just does not hang together.

What actually matters is how money is used, or more accurately how often it is used. This is called the velocity of money.

In effect, if you put your money in the bank, the bank will then lend it to someone else, say to buy a car. The person who sells the car might put some of the proceeds back into the bank which then lends it to someone else. They might buy a house and the seller might deposit the proceeds back into the bank which lends it again and so on.

So, depending on the banks' willingness to lend and our propensity to deposit, one dollar of base money can end up being many dollars of what we might call broad money.

This is the money that matters when it comes to inflation.

In those years when base money growth in the US was zero per cent, the velocity at which money was being used increased dramatically as banks lent without restraint and the debt boom really took hold.

Over this period broad money growth in the US skyrocketed from 8 per cent to 18 per cent.

Over the past year the velocity of money right around the world has totally collapsed. Despite that near 20 per cent growth in base money in the US, broad money growth is now just 6 per cent and falling quickly.

Put simply, the banks have dramatically cut their lending. While bank lending will eventually recover, it will never go back to the wild days of the mid 2000s.

Fears of rampant global inflation are greatly overstated.

If anything, weak demand growth and overcapacity on the supply side suggest deflation, or falling prices, is a greater risk.

So while some upward adjustments are inevitable, we can expect interest rates both here and abroad to remain well below their historical averages for a very long time to come.

http://www.news.com.au/couriermail/story/0,23739,25937176-3122,00.html