I could talk extensively about what is happening to the value of paper money, but to shorten things up, there is only one expression that you have to know: "quantitative easing." What a joke that is!

The authorities would have you believe it is some sort of magic elixir and a panacea, but all it represents is the monetization of various forms of debt by unfettered printing of money by central banks. Because the inflationary impact has yet to occur, the linear thinkers would assure you that it isn't going to be a problem. However, because of ongoing deleveraging and falling velocity of money in the short term, it is only being delayed.

As sure as death and taxes, continuing excessive money creation by the central banks will lead to accelerating inflation. When it begins to manifest itself, the velocity of money will pick up rapidly as people around the world rush to get rid of their increasingly worthless paper currency. In that event, we will rapidly progress from relatively benign inflation to truly frightening levels in a fairly short time.

At this point, I would like to repeat a quotation I used in a recent Investor's Digest article. It comes from Ludwig Von Mises, the brilliant originator of the Austrian school of economics, which is the only formal economics that makes much sense to me. Long before I was born, which was a long time ago, Von Mises observed:

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system."

David Fuller's view Today, debt-related deflationary pressures have the upper hand, which is the main reason why the world's central banks have been printing so much fiat currency. A destructive cycle of deflation produces not only lower prices but also lower sales, output and profits. This problem is particularly acute in the OECD countries.

There is also positive deflation in the form of lower prices due to technological innovation, leading to higher sales and profits. We have seen some positive deflation in all but the most economically backward countries. China, recently the subject of inflation scares, has benefited most from positive deflation due to the transfer of technology, aided by globalisation.

The deflation that we are experiencing, both good and bad, has probably slowed gold's nonetheless impressive price appreciation over the last decade, lengthening the duration of bullion's secular bull market in the process. While the price of gold remains in its overall upward trend (inflation-adjusted semi-log, historic semi-log, p&f, monthly semi-log, weekly 10-year semi-log, weekly 5-year & daily), we should not be fooled into thinking that it is overpriced as a store of wealth, let along a bubble as some have claimed. If there is one lesson that every investor learns and relearns with the march of time, it is that fiat currencies never hold their purchasing power for very long.

While gold is being increasingly remonetised in the eyes of investors, as I have said for a decade, it does have a fluctuating price, subject to competition and the whims of fashion. The main threat to gold's secular bull market, I maintain, will be the next significant rise in short-term interest rates, which will once again offer depositors some protection against loss of purchasing power. I do not know when short-term rates will next advance meaningfully but I am not currently holding my breath. Meanwhile, today's additional gains by gold on the heels of yesterday's upward dynamic are another indication that buyers are returning following the recent correction.