Many people believe there is a significant risk that the Irving Fisher debt-deflation theory of great depressions is still an economic threat today. They overlook the fact that he published his theory examining debt-deflation events under a gold standard.
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases.
Gold got off to a relatively strong start overnight as prices opened firmer overseas and briefly retook the $1,600 level. The bulk of the gains were driven by the perception that the rescue plan for Spain’s banks would be euro-beneficial.