PROTECTION AND WEALTH BUILDING STRATEGIES 215So in the short run, bonds are going to rally on deflation.
That said, I still like gold and hard assets for a slice; not the
whole thing, but for a slice, because in the longer run, they’ll
do well when inflation comes in.
You may be surprised to learn that even in deflationary
times, gold can perform well. From 1930–1933, for example,
cumulative deflation was 26%. The U.S. became desperate
for inflation. It could not cheapen its currency, because other
countries were cheapening their currencies even faster in the
“beggar thy neighbor” currency wars of the time.
Finally, the U.S. decided to devalue the dollar against gold.
In 1933, the price of gold in dollars was increased from $20 to
$35 per ounce, a 75% increase at a time when all other prices
were decreasing.
This shock therapy for the dollar worked, and by 1934,
inflation was back at 3.1%, a massive turnaround from the
5.1% deflation of 1933. In short, when all other methods fail
to defeat deflation, devaluing the dollar against gold works
without fail because gold can’t fight back.
So don’t think that because our portfolio is prepared for
either inflation or deflation that you’re bound to lose a portion
of your investments.
That said, I recognize that volatility and price drops may
be nerve-wracking. That’s why I’ve found a new precious met-
als play I’d like to share with you...
■ introducing the PMC Ounce: The Best of
Precious Metals With Less volatility
In a better world, central bankers would aim for true price
stability that wouldn’t involve inflation or deflation.
But whether you like it or not, central banks favor inflation
over deflation. Inflation promotes the goals of the policy elite: It
boosts tax collections, cuts the burden of government debt and