The rate of consumer price inflation edged upward at the end of 2009, following a rare episode of price deflation in the first half of the year. Overall, the annual average Consumer Price Index (CPI), before seasonal adjustment, actually fell by 0.42 percent from 2008 to 2009 (through November). This decrease mainly reflected sharply lower energy prices in the wake of the financial crisis and the global recession. Netting out volatile food and energy prices, inflation averaged a steady 1.7 percent throughout 2009.

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Deflation is unlikely to continue, if history is any guide. With a few exceptions, the price level has increased every year since World War II. Since 1913, the purchasing power of the dollar has fallen dramatically—according to the CPI statistics, by over 95 percent. That is the same year that Congress created the Federal Reserve System, which, as the nation’s central bank, is supposed to “fight” price inflation.

In our view, this long-term erosion in purchasing power is likely to continue as long as the United States retains a fiat currency. All the currencies of the world today are fiat currencies—that is, currencies that promise to pay nothing except more of the same currency and are legal tender (usable to extinguish debts and obligations) because their issuing governments say so. This system stands in sharp contrast to a gold standard, in which currencies are defined as or redeemable in specific weights of gold. Fiat currencies derive their value solely from a government fiat, or decree, that they are legal tender.

On Christmas Eve the Senate voted along party lines to raise the limit on the national debt by $290 billion. That sounds like a lot of money. But it’s only a momentary stopgap, postponing the next debt increase for a couple of months.

By the end of February, a debate will rage again over why we should or should not increase the debt limit. History suggests that however passionate the debate, it’s largely a charade.

The statutory debt limit is supposed to keep a lid on how much the government can borrow, but in this it has clearly failed. Since 1940, Congress has voted 90 times to increase the limit, extend the duration of a temporary increase, or change the definition of debt subject to it. Just since 2002 it has raised the limit nine times and nearly doubled the Treasury’s borrowing authority, from $6.4 to $12.4 trillion.

Every time Congress sets a new limit, the government quickly reaches it, and Congress responds by raising the limit again. So the question is not whether Congress will raise the debt limit again. The question is who will finance the huge federal budget.

The NAACP and other black organizations have urged President Obama to focus on the special problems of black workers during this long recession. The president said no, on the grounds that the soaring unemployment rate has hit all components of the labor force hard.

But there may be more to the issue than the notion that a severe recession is “an equal-opportunity un-employer.” In a cruel twist, ill-timed efforts to raise the federal minimum wage appear to have hit teen-agers (above all minority teenagers) especially hard.

The current recession started in December 2007. While the aggregate unemployment rate has not yet reached the post World War II peak of 10.8 percent it occupied in late 1982, younger workers have already fared worse.

The figure shows the behavior of teenage unemployment rates, which reached a record high in September of 25.9 percent for 16-19 year olds in the labor market. Young African Americans experienced an even higher level, 40 percent.

Swiss bank accounts held by Americans are likely to become as transparent as your telephone records. The year 2009 has seen the voluntary reporting of nearly 15,000 formerly undeclared offshore accounts owned by Americans, most of them in Switzerland. This tectonic shift seems to have begun with a single whistle-blower, an American who worked in the upper echelons of major Swiss banks for 15 years.

The backdrop is that the world has an estimated $7 trillion dollars in offshore bank accounts. Of this, perhaps 27 percent (about $2 trillion) resides in Swiss banks. The rest is thought to be in such tax havens as Hong Kong, Liechtenstein, and the Cayman Islands.

In terms of U.S. tax revenue, an estimated $100 billion a year goes uncollected as a result of evasion via off-shore accounts.

Switzerland had been the bellwether offshore bank location for privacy. Its reputation goes back at least to 1934, when the Swiss government imposed secrecy on accounts owned by foreigners in Switzerland as a way of resisting Nazi attempts to keep track of German holdings in other countries.

In recent years, Swiss banks have come under rising pressure by foreign governments to open their books. Since 2001, for example, the U.S. has sought to collect taxes on American accounts held offshore by means of the Qualified Intermediary (QI) program. Some 95 percentof Swiss banks participate, or all but the smallest local banks. Until now, this has allowed Swiss banks to pay taxes to the IRS without revealing the identities of the American account holders—in what amounted to an “honor system.”

Gold is one of the few investments that have done well in the past decade. While stocks, real estate, and many commodities have experienced volatile booms and busts, the gold price has increased by more than 300 percent since 2001. It reached $1,200 an ounce in December, a record high in nominal terms.

Investor interest in gold is higher than at any time since the 1970s. Some are simply chasing the latest hot investment. Some are disillusioned with stocks or trying to diversify their portfolios. Others are buying gold because its unique properties and history resonate strongly now, in the wake of the past year’s financial and economic turmoil and the immense scale of the federal policy response.

Simply put, gold is no ordinary commodity. Gold is money, and throughout history it has served as a store of value and as a safe haven during uncertain economic times. It is both imperishable and liquid. It is produced not just for consumption (as are most commodities) but also for accumulation. Its primary function is as a liquid store of wealth, not as an industrial input or item of consumption.

Consider that the annual production of consumed commodities (such as oil) roughly matches annual demand, and relatively little is left to add to above-ground supplies. Gold is different. Virtually all the gold that has ever been mined throughout history still exists today in above-ground stocks. Because of its high value, very little is ever lost. According to GFMS, a leading industry research firm, the known world gold stock today is about 163,000 metric tons, or 5.2 billion troy ounces, an amount that could fit into a 66-foot high cube.