Black Swans Yellow Gold

by Michael J. Kosares

How gold performs during black swans: periods of deflation, disinflation, stagflation and hyperinflation

Gold as a deflation hedge

United States (1930s)

Webster defines deflation as a “contraction in the volume of available money and credit that results in a general decline in prices.” Typically deflations occur in gold-standard economies when the state is deprived of its ability to conduct bailouts, run deficits and print money.

Gold as a disinflation hedge

The United States (2000s)

Just as the 1970s reinforced gold’s efficiency as a stagflation (combination of economic stagnation and inflation) hedge, the 2000’s decade solidly established gold’s credentials as a disinflation hedge.

Gold as a stagflation hedge

United States (the 1970s)

In the modern global fiat money system, when the economy goes into a major tailspin, both the unemployment and inflation rates tend to move higher in tandem.

Gold as hyperinflation hedge

France (1790-1795)

Those two short paragraphs speak volumes of gold’s safe-haven status during a black swan period and may raise the most important lesson of all to ponder: the role of gold coins in the private investment portfolio.

Gold as the portfolio choice for all seasons

A book could be written on the subject of gold as a hedge against the major black swans (negative economic scenarios) – deflation, disinflation, stagflation and hyperinflation. I hope the short sketches provided over the course of this series have served at least as a functional introduction to the subject.

A chronology of panics, mania, crashes and collapses

400 BC to present

This chronology was compiled as an accompaniment to my short study on the four most commonly predicted worst-case economic scenarios. My original intent was to make a short list that would illustrate the frequency with which periods of economic breakdown made their appearance in the historical record.

Michael J. Kosares was the founder of USA GOLD and the author of The ABCs of Gold Investing – How to Protect and Build Your Wealth With Gold. He was also editor and commentator for USA GOLD’s Live Daily Newsletter and editor of the News & Views monthly newsletter.