Many financial market participants still talk about a second Great Depression. They speak of a great wave of devasting 1930s style deflation washing over the United States.

These people seemed to have not noticed how the world has changed since the 1930s. On the plus side, today we have the emerging markets with billions of people moving up the economic ladder rapidly.

These economies are not over-leveraged with debt as is the US. These economies are moving rapidly away from an "export to the US" model and are now focusing on internal consumer demand, and therefore should continue to grow nicely no matter the problems in the US.

On the negative side, the 1930s was a relative time of plenty with regard to the supply of commodities (no, I haven't forgotten about the Dust Bowl). Today, due in large part to the emerging markets, key commodities such as oil are relatively scarce and will most likely continue to rise in price, no matter the economic conditions in the US.

I believe the most important difference between now and the 1930s is our money - the dollar. At the beginning of the Great Depression, the US dollar was still a gold-backed currency.

Every dollar in circulation HAD to be backed-up by an equivalent amount of gold. This is why the Federal Reserve at the time could not add much money into the economy. They were restricted by the amount of gold that the US had in its vaults.

We are now, of course, off the gold standard and the Federal Reserve can and is printing up untold trillions of dollars. I always remember Mark Twain's famous line about how history doesn't repeat, but it does rhyme. I believe this time we will "rhyme" and have a bad economy but instead of with deflation, we will have high inflation.

Since I touched on gold, I wanted to once again speak about gold's value as a financial insurance policy. To me, gold is not an investment but an insurance policy against financial calamities. It should be looked at in the same way as people look at home or health insurance.

Here are some interesting facts to back up my point. In October 2000, the S&P 500 was trading at a level of 1379, while gold hit a multi-year low at $263.80.

Since then the stock market has been a disaster with the S&P 500 down by a third currently to the 918 level. During this time, gold has risen to a current price above $930 - a gain in excess of 250%!

Even a small allocation to gold (insurance) in your portfolio would have helped preserve some of your wealth during this bear market.

Will gold continue higher? I would say yes - a slow, steady climb. I will only change my opinion on gold if I finally see true reforms being instituted in the financial markets. The latest "reform" package presented by President Obama this week was laughable at best - more "business as usual" for Wall Street, with the foxes still in the chicken coop.

Please feel free to contact me directly with any questions or comments about this article or any other financial matter.