Wednesday, December 7, 2011

Why Does Jay Taylor see DEFLATION as GOOD for GOLD?

Interesting view from Jay as always.
There are a number of intellectual gems in this article that warrant a little due diligence by us all, All the chatter about what will happen around money and gold has all centered on inflation as the loss of value.
Jay, in saying deflation will increase gold's value, adds to our understanding of what's going on. There is no real conflict with the prevailing view of gold being a protection against inflation.
The real view, implicit in gold's aura is that the problem is money itself—and its governance, hence trustworthiness, of the whole 'class of bankers' and there relation to their actual utility and true place in our emerging world.
Gold is EVERYONE'S Standard

'Deflation in US to create boom in junior gold stocks'—Jay Taylor

Jay Taylor believes the biggest challenge facing the U.S.—deflation—could mean a better year, or even decade, for junior Gold stocks. Taylor, editor of Jay Taylor's Gold, Energy & Tech Stocks, has ridden some equities to the bottom of this punishing market and is ready to pile more cash into small gold companies. In this exclusive interview he explains why market sentiment hasn't shaken his faith.

Companies Mentioned: American Bonanza Gold Corp. - Aurvista Gold Corp. - Calico Resources Corp. - Crocodile Gold Corp. - Great Panther Silver Ltd. - IAMGOLD Corporation - Meadow Bay Gold Corp. - Merrex Gold Inc. - Metanor Resources Inc. - Nautilus Minerals Inc. - Pretium Resources Inc. - Prodigy Gold Inc. - Rye Patch Gold Corp. - Sandstorm Gold Ltd. - Silver Wheaton Corp.

The Gold Report: In the Nov. 4 edition of Hotline, you note that America's ratio of debt to gross domestic product (GDP) is north of 350%. Our total debt as a society is somewhere around $57 trillion (T). That's worse than Greece. Is deflation America's biggest economic threat?

Jay Taylor: I believe it is, however, most of my goldbug friends wouldn't agree. It is important to realize that the U.S. is not a third-world country. It still has the world's reserve currency. The central bank, the Federal Reserve, doesn't put money into the hands of the masses. It puts money in banks. It's all about credit extension. That is very difficult to do now. With the debt-to-GDP ratio as it is, it's unsustainable. The markets are telling us that—not only in the U.S., but clearly in Europe as well. We are undergoing one of the largest debt-deleveraging periods in a long time, which may be much larger than what we went through in the 1930s.

TGR: You believe there should be no more bailouts, let this debt wrench itself out of the system and let bankruptcies occur.

JT: Absolutely. Most people don't understand the reason we're in trouble is because the good times that we had were false. They weren't based on savings and investment. They were based on money creation through credit extension. The nice homes, the big office buildings, fancy cars, everything—it wasn't earned, it was based on debt. Now that the debt cannot be repaid, the expansion goes into a contraction. That process has a long way to go.

Read more here

Extracted: Jay's list of junior gold stocks.

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