The following article has been contributed by Niall Devlin.

Editor’s Note: For the last several years there has been a regular debate between the deflationists and inflationists about where the economy is going. It is clear that the amount of credit outstanding in the system will have to be unwound and unserviceable debt will have to be cleaned out before any economic recovery will happen. The broad view from deflationists is that there is so much credit in the system, that the government’s current stimulus plans are simply not enough to offset the collapsing debt – this is one of the reasons that Keynesian economists like Paul Krugman advocate the spending of Trillions of dollars. Krugman, Bernanke, Geithner and the rest of the powers that be are well aware that our economic and financial systems are under extreme deflationary pressure that could lead to a stock market collapse, an economic contraction and severely falling prices. Deflation is knocking on the door. The unknown variable in the equation is how far is our government willing to go to induce the opposite effect, as George Soros has recommended. The government simply cannot sit idly by and do nothing (which would likely be the best medicine).  If history is any guide, government will do whatever is necessary to “save” our system. Though it is impossible to predict exactly what the government will do going forward, and thus, it is impossible to determine if we should expect deflation or inflation during this depressionary cycle, we can draw on history to get an idea of what they plan on doing. Historically, governments have always debased their currencies when their costs have gone up and debt became unmanageable. Look no further than these two charts for a historical perspective of Rome and how it relates to the United States today.

We believe that deflationary pressures will lead to a serious contracting in our economy going forward, which will include lower real estate prices, more job losses, and more personal and commercial credit defaults. At the same time, the government has demonstrated its willingness to print as much money as is necessary to offset, or as they like to say “stabilize” the price collapses. How far are they willing to go? We know that they have no problem spending at least $23 Trillion. So, we have to assume that they would be willing to go all the way and completely debase the US dollar to “pay off” all the bad debt.

The fact is, that no government currency (fiat) has ever survived. What makes the US Dollar any different?

The Catastrophic Effects of Inflation

by Niall Devlin

A SOBER THOUGHT

The Debasement or Destruction of value in their money, has led to the decline and collapse of at least 6 major empires throughout history.

WHY IS HISTORY IMPORTANT?

• History repeats itself
• It gives us the perspective we need to correctly understand our day

INFLATION TODAY

• Governments Enact Favourable Banking Laws
• Banks Create New Money Through “Credit Expansion”

WHAT DOES INFLATION DO?

• Inflation Erodes Savings and Destroy Wealth
• Inflation causes Artificially High Asset Prices
• Inflation causes Mal –investment
• Inflation causes Unsustainable Debt
• Inflation causes Poverty through Deflation

MONEY, HISTORY AND GOLD

• 5000 years of Monetary History
• Money is the barometer of the Health of all societies (ethical & moral)
• Money has a Repetitive Cycle
• Inflation – monetary phenomena is the number One cause of loss of wealth
• We have been living in a time of extreme monetary Inflation

UNDERSTAND THE LIFE CYCLE OF MONEY

1) Free Market emerges
2) Free Market Money develops (gold and silver)
3) Government becomes involved in Free Market Process
4) Government monopolizes money and supply
5) Government debasement of money
6) Confidence crisis and Collapse
7) Gold and Silver re-emerge as Free Market Money (cycle continuous to repeat)

A SOBERING THOUGHT

• Inflation Erodes Savings and Destroy Wealth
• Inflation causes Artificially High Asset Prices
• Inflation causes Mal –investment
• Inflation causes Unsustainable Debt
• Inflation causes Poverty through Deflation

The value of money is going down!!

PROTECTION FROM DEBASEMENT & INFLATION

• Gold & Silver maintain stable “Purchasing Power”
• Gold and Silver only money that is not simultaneously someone’s debt.
• Gold and Silver has functioned as money for 5000yrs.
• Gold and Silver always been the King of Assets and Asset of Kings
• Gold and Silver always been universally recognizable
• Gold and Silver have always been very liquid
• Gold and Silver have never suffered a confidence crisis
• Gold and Silver always free market money of choice
• Gold and Silver Geo-political and Financial “barometer”

The article above has been contributed by Niall Devlin. Niall is passionate about gold, silver, wealth protection and sharing the message -the truth about money and the biggest financial deception known to mankind, Albert Einstein put it nicely “Gold is money, paper is not”. Visit Niall Devlin’s Wealth Protection and Creation web site.

Editor’s Summary: It is clear that the long-term result of all government backed currencies have led to either debasement of the currency system in question or a complete default. We can expect something similar with the US dollar, though it is impossible to provide a time frame. In terms of gold, we know this particular asset has always served as money, especially during times of crisis. Niall Devlin is spot on in his suggestion that gold and silver are geo-political financial barometers. We pointed out in Gold and Silver – Will They Protect You? that precious metals rise not necessarily during times of deflation or inflation, but rather, during times of crisis. We can’t be certain of the exact direction of asset prices in the near- or long-term, but we can be fairly certain that the world is in crisis today. We encourage our readers to consider gold and silver as a way to help preserve some of your wealth and prepare for the possibility of coming catastrophe.