Fibonacci Financial

The Inflation vs Deflation debate rages all over the Web – So who is right ?

Last years deflationary collapse was revealed by a break out of a 2 year consolidation of the Gold/Silver ratio.  After burning itself out temporarily and yielding to the current mini bail out bubble the Gold/Silver ratio has once again entered a consolidation formation.  The breakout should indicate which tide will overwhelm the markets over the next 9 to 18 months.  My guess is that you will not find this insight anywhere else on the web.

Vide !

How does this work?  Silver was demonetized a century or so ago and now a large part of its demand comes from the industrial/jewelry sector (although the monetary demand is growing again).  Therefore it is more sensitive to a deflationary collapse.  Although the central banks and governments of the world have worked tirelessly to demonetize gold, it still is part of the monetary base of most central banks.  In spite of blatant manipulation by central banks and governments it still is less sensitive to deflation.  If the Bernanke/Obama bail out/stimulus printing presses overwhelm the collapse of toxic debt and we head into another inflationary/hyper-inflationary period, gold and silver will both break out to new highs but silver will run faster.  As the price of silver outpaces gold on a relative basis, the Gold/Silver ratio will decline.

Why should you care dear reader?

The next tide of either Inflation or Deflation will have a massive impact on your investments and wealth.  Knowing which one will dominate should dramatically alter the composition of your investments and impact your financial decisions.

The Gold/Silver ratio is one of the key indicators that I watch.

We don’t have to guess or predict the outcome of the Deflation / Inflation tug-of-war.  We just have to be alert to what the markets are telling us and reallocate our portfolios accordingly.

You saw it here first.  So, Stay Tuned ! ! !