This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Michael Ehrmann and Panagiota Tzamourani (European Central Bank): Memories of high inflation, September 2009. Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This paper tests whether memories of high inflation affect agents’ preferences about the importance attached to price stability, using a large database covering over 52,000 survey responses from 23 countries over the years 1981-2000. It finds that memories of hyperinflation are there to last, whereas those of less drastic inflation experiences tend to erode after around 10 to 15 years. The recent decline in

Deflation and the price of Gold. Give yourself an extra point for spotting the trick question. It’s already tripping up plenty of would-be answers. Because gold must fall during deflation, since it rose so much during the inflation of the 1970s – right? “Gold Prices, in real inflation-adjusted terms, unsurprisingly tended to increase during inflationary times,” nods one commentator, writing in London but posted at the strong>Business Times in Singapore. “Its purchasing power tended to sag during depressions and deflation.”

The source for this claim? Besides syllogism (”The ’70s gave us inflation and a gold bull market; ergo, the opposite must be bad for gold…”) it was apparently Roy Jastram’s The Golden Constant, that dry, dusty study of gold’s enduring stability across the very, very long run by the end of which we will all be deader than disco.

First published by Wiley in 1977, The Golden Constant has

The 1970s didn’t just curse the world with cheap German wine and the Bay City Rollers. That decade gave us soaring inflation, too.

Gold’s stellar run up to $850 per ounce, rising more than 24 times over, also came in the ’70s. So gold, therefore, must deliver its strongest returns when the cost of living shoots higher. Right?

Wrong. “In the long run, stocks have thrashed gold as great long-term hedges against inflation,” says Jeremy Siegel, professor of finance at Wharton University, Pennsylvania. What’s more, the eight-year bull run in Gold Prices so far this decade has come against the lowest average consumer-price inflation since the early 1960s.

In short, the common opinion of gold as first and foremost a defense from inflation is wildly amiss. Just look at the last 30 years.

Consumer prices in the United States, even on Washington’s data, have pretty much trebled since 1980. But starting at what was