The surprise cut was in January Kurt... furthermore, gold is a terrible investment in nominal terms during deflation; however, its purchasing power always remains the same, which is the one groovy aspect of gold. As a means of exchange, it's cumbersome and ineffective. Dollars become more scarce and more valuable during deflation and since most of the increase in the money supply over the past several decades was debt, the impending vaporization of that debt (which is happening as we speak) will bring about deflation. Deflation will purge all the excesses out of the economy and allow us to start again from a solid footing. I agree with you whole heartedly that this harsh period of time we will go through is necessary (probably the best thing that could happen to this country) and will help bring us back to the principles this country was founded on. We were in in a nearly identical debt position at the end of the 1920s and had the same carefree mentality and the Depression ended up strengthening us. Bottomline, we have already seen that deflation can happen in a fiat regime. Japan is a prime example. The Fed will not monetize trillions of dollars of debt, because the game will end for good.