Marla:  Greg for the first time this week, I started to hear the D word….depression.  What is the difference between a recession and a depression?

Greg:  Well Ronald Reagan used to say a recession was when your neighbor lost his job, a depression was when you lost yours.  But the reality is, it is all a matter of degree.  Recessions typically last 8-14 months, depressions last for years.  Recessions may have high single digit unemployment rates, depressions have double digit unemployment rates.  Recessions may see high inflation rates, depressions may manifest with hyperinflation.

Marla:  What do you mean hyperinflation…is this the old wheelbarrows full of money to buy a loaf of bread scenario?

Greg:  Very good.  It is exactly that….and it is something Americans don’t have much experience with.  You see our Great Depression of the ‘30’s was deflationary.  Economic activity fell off a cliff.  Prices fell.  Things deflated.  Most countries, however, experience the opposite.  The French, the Germans, Argentines, Brazilians, Egyptians all experienced slowing economies with rampant inflation.  That’s a bad cocktail.

 Marla:  So what brings on the inflation vs. the deflation?

 Greg:  Typically a nation will print too much money and at some point confidence in the currency is lost.  Once that occurs, prices soar as people try to unload their paper currency in exchange for something tangible as fast as they can.  It is when velocity on the money increases that we see the panic induced inflation as that big ol’ supply of printed money goes into overdrive on the velocity scale..

 Marla:  But we’re printing money now and we haven’t seen prices soar.  In fact the opposite, gas prices are falling and everything is on sale at the mall.

Greg:  Again, good points.  And here is the answer.  Some of the money we are printing is going into savings and paying off debts.  There is not much velocity there.  Second, every major country in the world is doing what we are doing, printing money.  So, even though we are printing, we are printing less than Europe, China and Russia, so right now the dollar is the prettiest pig in the ugly contest.  The other reason is there is usually an 8-11 month lag time between printing money and the when the inflation shows up in the system.  If history is any guide though…there is inflation in our future.

Marla:  So, what should investors do?

Greg:  Historicaly the answer is to Invest in things that can’t be printed.  This is why you see gold, silver, copper, wheat and energy prices creeping up. You can’t print these things.

Marla:  Did people really need wheelbarrows full of money to buy bread?

Greg:  Yes, the great stories are, though, the women would bing their wheelbarrows, park them outside, buy the bread, come back outside and find the wheelbarrow had turned over, the money was still on the street and the wheelbarrow had been taken.  Let's hope it doesn't come to that.