middle. They believe we should liquidate everything held in a bank, print out any stock certificates and lock them away and then retreat under the bed with a shotgun and a couple of gold bars.

All of this should make Gordon Brown squirm about his decision to sell more than half of Britain's gold reserves in 1999 when the price of bullion was at a 20-year low. The price of gold has since soared three-fold and Brown's decision has cost the Treasury around £3bn. Aside from the direct financial hit, it would have been extremely comforting for the British government to have had 400 extra tons of gold bars in its vaults these days versus stacks of Euro-denominated bonds.

It would be easy in calmer times to dismiss the Gold Bugs as wackos. But the evidence in their favour keeps on piling up. Sixteen per cent of American homeowners now owe more than their homes are worth, up from six per cent last year. One incredulous Wall Street analyst told me that there was a day last week when not a single new car was sold in the United States. The average daily sale used to be about 40,000.

Gold's value is also likely to rise with fears of inflation. The debate over inflation has become impenetrable. Official figures suggest it is under control. All those banks who cut interest rates this week don't seem to be worried about it. And yet anyone who has to fill up their car or go to the supermarket knows the truth: everything is much more expensive than it was a year ago. The only conclusion can be that official inflation figures can no longer be trusted.

Inflation would be the quickest way for the United States to wipe out its debts

There is another reason to believe that inflation is secretly desired by the United States. It would be the quickest way of erasing its debts - far quicker than actually working to pay them off.

Milton Friedman said that inflation is a purely monetary phenomenon. The more money sluicing through an economy chasing a limited supply of goods, the higher inflation goes. Many economists argue that this fundamental link has been broken by globalisation, the rapid growth of emerging economies and more sophisticated money management by Central Banks.

But it is hard not to suspect that all those colossal cheques being written by the US government and others will not have some effect on prices. Ten per cent inflation by the middle of next year will make the gold hoarders look even smarter than they do today.