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00:00Can you call higher inflation. You've been so good about avoiding that trap . Well I don't think there's any inflation coming in the foreseeable future. This is a an absolute global economic detonation and the implications for aggregate demand around the world. What this does to the output gap is going to cause deflationary pressure to dominate. I'd say for least the next year you know maybe with the gobs of monetary stimulus. When we look way beyond you know the near-term intermediate term outlook maybe you can build a view that the dramatic increase in money supply will at some point bump against an increase in money velocity. But you know that's going way out into the future. I think for the here and now and the intermediate term deflation is going to reign or inflation . What does gold signal to David Rosenberg . Well I think that you know gold ultimately is going to be a hedge against the two extremes. Of course it does have the classic properties of being a hedge against inflation. You know maybe that comes down the road. Everybody thought that the repeated quantitative easing measures in the U.S. were going to translate into inflation. Last cycle that never happened because money velocity kept on going down. And gold is also a hedge against the other extreme which is what does a deflationary environment do to debt defaults and downgrades and insolvencies. Because the one thing that we do know that was exposed in this crisis was how dilapidated corporate balance sheets are not just in the U.S. but globally. That's why the central banks had to step up alongside the fiscal authorities to save the day was because the complete lack of liquidity and the all the grotesque amount of leverage that's in the system. So the problem with deflation with debts where they are is it triggers an unstable wave of debt defaults. And so gold will also be a hedge against that in that environment as well .

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Deflation to Reign Over Inflation for Here and Now: Economist Rosenberg

“I don’t think there’s any inflation coming for the foreseeable future,” says David Rosenberg, chief economist and strategist at Rosenberg Research. He speaks with Bloomberg’s Tom Keene on "Bloomberg Surveillance." (Source: Bloomberg)

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