An underlying theme to Ed's concern over deflation appears to be yearning for a "return" to gold standards, a hope, I suspect, that this takes issues of currency valuation out of the hands of mortals and puts it back into the hands of the gods (or some other such absolutist realm). In point of fact valuation of currencies, whether beads, wampum, abalone shells, silver, gold or greenbacks is now and has always been a human social/economic issue. It depends upon something approaching a societal consensus - there is nothing inherent to gold than makes it more valuable than salt - so whether its Greenspan encouraging a consensus on greenback values or Goldfinger corralling the market on gold, it is a human issue. An aside, if gold is presented as a solution to concerns for deflation one should spend a little time calculating present gold stocks relative to global currency needs - there would be a collosal devaluation of everything except gold, and that would inflate like nothing we have seen before. No the value of gold is as much as social construct as anything else. I for one am quite happy to see gold relegated to jewelry and antiquity. Regards,
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