CrunchTimes

Of course not. Ever tried deflating a balloon that hasn’t been blown up yet? Kind of hard to do, isn’t it?

When we think and talk about things, we often unknowingly accept and attach misleading labels to them, without giving it any thought at all. It’s sort of a “garbage in, garbage out” principle. We accept a label others have unthinkingly given a subject, and then we run with it, which means by necessity that we are misapplying it.

It’s just that way when we are thinking about gold and deflation.

The usefulness of the answers we get to our questions depend on how well we phrase our questions. Asking whether gold will ‘deflate’, for example, assumes that it can deflate in the first place. The question also doesn’t really capture our main concern.

We don’t care whether a gold bar we own will physically shrink in size. What we care about is whether, during a deflationary recession or an outright depression, its value will decrease to such an extent that it loses its utility as a hedge against untoward economic developments. That’s kind of the nerdy way to put it.

The underlying concern is: “Will owning gold keep my wealth intact during a deflation?”

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