If we preface this by saying that a market collapse brings on a dollar rise, or vice-versa, then we would have to conclude that the inflation/hyperinflation argument is not valid, at least initially, since the Williams/Schiff inflation argument is that it is brought on by a dollar collapse.

The question is: what is gold pricing in right now, at $1400? Is it inflation? A collapse of fiat currencies and return to some sort of gold standard? Or is it benefitting from the liquidity and confidence that has pushed higher all credit values, as in the all-the-same-market view that is held by Hoye and Prechter?

My view is that in the classic deflation scenario, everything falls and the dollar rises, since a collapsing denominator (money + credit) must force downwards every asset class in the numerator, since by definition there would be fewer dollars in existence to go around and value assets, including gold. I think that is what is in store.

The key then is to avoid those gold stocks that are widely held and have gone up a bunch, and focus on the ones with strong balance sheets that are below the radar price-wise, for they will benefit the most imo in a rising real price of gold scenario...as was the case in the 1930's. They will all fall initially, but some will fall alot less than others.

Gold was fixed in price in the 30's, thus further amplifying gold stock performace as the real price of gold took off. If the gold price is acting conservatively today -- this is key, we would want and expect it to if it is real money -- then it will fall the least during the deflation with a result similar to the 30's for certain stocks.

Conservative price action now is critical though, which is why I chuckle when I see comparisons made to the real estate boom or the Nasdaq rise in terms of what we should expect gold to do. If gold is real money, it certainly shouldn't act like a drunken fool, should it?