I think you have missed the point of the joke about 2s and hands. This is a question of law. To frame the issues more pointedly so you cannot misunderstand; (1) What is a dollar plus a dollar? (2) What is a dollar?

Without answering those questions it is impossible to answer the others as they are underlying premises and you have failed to lay a proper foundation (which is why I alluded to these questions at the start).

As far as the inflation issue; perhaps you have a rule citation for why it does not refer to the Austrian definition. The Austrian definition was first and therefore is the conventional definition. The current obfuscations on the issue of what inflation is, has widespread disagreement, multiple definitions, is open to discussion and as all additional attempts at defining it are derivatives of the initial Austrian definition it follows that using the Austrian definition would be natural and the burden of proof would shift to someone attempting to use a different definition.

But to hit more directly at your assertion, ‘The price of gold has nothing to do with it.’ As I laid the foundation at the start, “For this analysis I will use gold as the presentation currency and the US$ as a functional currency and apply the relevant Standards.” Your assertion is in complete contradiction to the Bank for International Settlement’s treatment of gold as a monetary instrument and presentation currency under IAS 1. Perhaps you have a rule citation or some example, which is highly unlikely given how central banks account for gold on their balance sheets, of a similarly respectable banking institution that does not treat gold as a monetary instrument.

“Under IAS 29.3 the four factors are (1) the general population flees the local currency,” – Obviously this is not happening. A few gold bugs do not constitute the general population. The general population is not fleeing the local currency.

“(2) dual currency pricing is practiced,” – Obviously this is not happening. The IAS means practiced everywhere, routinely, not practiced in a few stores in New York.

“(3) prices for purchases on credit incorporate the loss of purchasing power” – Obviously this is not happening. If you go to a dealer and buy a new car on credit, they do not add 30% a year to compensate for the loss of purchasing power. Likewise for anything else you buy on credit. It may be true that businesses are reluctant to extend credit, but that’s because they are unsure of the customer’s ability to pay, not because they are worried about the loss of value of the currency.

“(4) the cumulative inflation rate over three years approaches, or exceeds, 100%.” – Obviously this is not happening. Inflation, in this context, does not refer to the Austrian definition, it refers to the conventional definition: inflation means a rise in the general price level, and 100% inflation means a doubling of the general price level. Prices of big ticket items (houses, furniture, appliances, cars) are going down. Prices of clothes are going down – if you look for sales you can get the clothes you want for 50% off. Groceries have gone up a little. The price of gold has nothing to do with it. Even if the price of gold had doubled in the last 3 years, this would imply nothing about inflation as IAS construes it.

The statement that the US dollar is in hyperinflation by the IAS definition (or any other reasonable definition) is on the same level as 2 + 2 = (47). It’s utter rubbish.

Richard, the Austrian definition of inflation is an increase in the money supply. Deflation is a decrease in the money supply. Of course, that begs the question: What is the money supply? Some stratification between assets is shown in the liquidity pyramid that you can find in this article: http://www.runtogold.com/2008/02/first-snowfall-of-kondratieff-winter/

Consequently, the theory I am asserting allows for hyperinflation to function like deflation because capital moves out of the currency asset into gold as it is lower (safer and more liquid) in the liquidity pyramid.

However, isnt this the exact opposite of what you say, namely hyperdeflation of the US dollar with respect to Gold.

The first condition of general populace fleeing the currency – the demand for gold does not imply that there is NO demand for the dollar… The demand for gold being so high is due to the relativly low price of gold in the current scenario. So therefore demand for a particular commodity due to irrational pricing cannot be construed as the shunning of its substitute…

Regarding dual currency being practiced, the fact that one or two people accepting the euro as payment – using this as evidence for hyperinflation is quite inadmissable… the fact is that the person said “money is money” is, infact, proof that hyperinflation does NOT exist and that they are quite willing to take either currency to convert at the bank at a later date. This would imply that the currency is considered rather stable, since he has no qualms of exchangin the euroes with the bank at A LATER date. Further, people are not using the euro in LIEU of the countries legal tender.

Your final point also has flaws since the inflation rate is over 100% over a THREE YEAR period, and you’ve taken the price of at almost the peak, not after its dropped below $700 an ounce…

http://www.economicsjunkie.com/recessions-and-the-true-money-supply/