by joelado, Sun Nov 20, 2011 at 11:30:04 AM EST
Gold doesn’t have the capacity to do anything that the Federal Reserve Bank can do to regulate inflation or deflation. Gold doesn't allow money supply to keep up with money creation, which is what happens in a sound economy. Gold is a limited supply commodity that is finite. It won't reach to cover the United States economy and there ain’t a prayer that it can cover the world's economy. Deflation has economic problems that can be just as bad as inflation. If we tried to use it as our currency, we would have massive deflation. Massive deflation leads to money hording rather than investing and banks can’t lend because the value of things are going down. Deflation is mostly associated with depressions.
Let me explain. Remember when real estate was the only sure bet investment? It had real… estate value. You could pass it down to your children. You could live on it, or in it. It had physical size and was tangible. However, its value went up and up and up, far beyond its real affordability. Why? How?