The PTB must have many schemes up their sleeves to avoid a deflationary meltdown but as we all know ,these schemes would result in the increasing of the money supply in one way or another and we all know this would Result in a weaker USD. Of course more debt would have to be generated -- and the question is who would be Targeted and Creditworthy; and who would be the Lenders? The PTB would of course supply the credit of last resort to the Lenders, and maybe even warrant the repayment! In my opinion there is no limit to how far the PTB will go.

There is still an outside and highly unlikely chance that the PTB do the correct thing and reign in the Money Supply and the Debt in time.

In either eventuality inflation or deflation, I believe that the outcome will be what Ian Gordon calls the Kondratieff winter.

I realize that it is impossible to predict what the PTB will do in the future or how things will eventuate but we must do something to protect our savings and capital.

It seems to me that there are two ways to do this( I would love to hear of another) :

1. Spread your risk and diversify by spreading your investments over gold , commodities ,cash etc, or
2. Take a view on either inflation or deflation and invest accordingly. If one has taken the wrong view then the question is; will there be enough time to change if things go the other way. Rick Ackerman seems to think that things could change so rapidly that it would be almost impossible to swap out without getting badly burned.

The problem is how long would it take to recognize the change and exactly when would one be certain a change has happened or is happening.

It seems to me that 2 is too much of a gamble, and that we should not be greedy. We should make protection our top priority. The only option then is number 1. And the problem would be how to apportion your investment capital.

There are only 5 main categories available, and all investments in my opinion fall into these categories.

1. Cash/interest bearing and safe
2. AAA Bonds such as UST
3. Gold
4. Selected Gold Equities
5. Equities that rely on the growth of an economy.

I have excluded derivatives such as puts/calls as being too risky for the average investor like myself.

To make your own allocations you would have to rely on your knowledge, instincts and gut feel (and the more you read the better are your chances ) and you are the only one to know to what extent you should risk or play it safe.

Maybe the sounder and certainly easier method would be to pick on an investment adviser, such as Jay Taylor, and put your trust in that adviser - maybe a combination of both..

The important thing is not to carry on with past investment strategies.

As recently as 2000 and many times before this many people thought that things were great until the meltdown and proceeded to lose all their gains and even all or part of their original starting capital. This happens and will continue to happen time after time.

There are so many divergent opinions from so many very wise economists, it is hard to know who to listen to, and impossible see into the future. So diversify now before it is too late; the crash is coming

The Backyard Economist
Norman Arcus
South Africa

18 November 2005