Adam Hamilton over at Zeal Research wrote a paper some time ago that really opened my eyes to the stupidity of the inflation/deflation debate.

There is one and only outcome from excess money printing, inflation. If it gets bads enough it causes a currency crisis and perhaps a collapse of the currency. During an inflationary event things get mispriced; sometimes horribly so, e.g. housing.

In a stable system with no money printing, prices should be continually decling as mankind gets better at making and producing things with greater efficiency. The only exception to this would be when approaching the end of a limited source such as oil. With oil there is still plenty around but we can't produce it any faster and will never be able to produce it faster again. Soon the demand will exceed the supply.

After a money printing episode, the things that fall in price such as housing, fall because they got mispriced due to the loose money floating around. The loose money will tend to find favorites which everyone starts piling into them and the price gets distorted. When price starts to correct there is always someone who will holler, Deflation!" but it's not deflation. It is simply a correction of price in things which became badly mispriced. The reality is, that if the same basket of goods is measured before and after money printing, once prices have become balanced again the prices will be higher in the same percentage as the money was increased.

So I agree that we will not see deflation. Inflation is already baked in the cake. If and when the money held by the banks is lent once again prices will explode; hence the need to have one's assets in something other than dollars or any other currency for that matter. Precious metals are the only tangible assets one can reasonably store that keep their value. Other items are too bulky, have a shelf life, whatever. That is precisely why precious metals have served as money for milleniums.

There are times however, when even money cannot meet our most desperate needs, hence the practicality of Eccl 7:12 "For wisdom is for a protection [the same as] money is for a protection; but the advantage of knowledge is that wisdom itself preserves alive its owners."

P.