Gold during recessions/depression(by Paw Rugg)

Gold during recessions/depressions	Paw Rugg	NEW 9/1/2007 4:21:45 PM
Thetwo most recent big recessions/depressions in the U.S. were the early30s depression and the 70s "recession" (which Ronald Reagan correctlycalled a depression). What happens to the purchasing power of gold during recessions/depressions? Here's the answer Nevermind that this chart came from (I think) Jeremy Siegel's book and isintended to make gold look bad. The point I want to make is that if yousee a big recession/depresssion coming and are trying to guess whetherit will be "deflationary" like the 30s or "inflationary" like the 70s,it does not matter. Gold was then, and is now, the place to be. Ihave heard arguments like "gold went up in the depression because itwas the official money". But dollars were "more officially money" thangold was, yet gold appreciated against dollars. I have heard arguments like "gold went up in 1933 because FDR revalued it". Gold went up (in demand relative to dollars) first,and as a consequence the dollar/gold peg became unsustainable, so FDRdefaulted on redeemability and reset the peg at a different rate. Ihave heard arguments like "gold went up in the 70s because the $35 pegwas broken in 1971, and that was a one-time event, never to repeat".But what was the peg? It was the willingness of the U.S. govt to sellgold at $35 even though it was worth more. Gold was alreadyworth more than $35/oz because of excessive printing of dollars, whichmade the peg unsustainable. In 1971 as in 1933 the broken peg was aconsequence, not a cause, of the gold bull market.