Gold is the Alpha Currency
The Dow closed at 26,616 on Jan. 26, 2018, a new high.
The Dow closed up 320 on October 11, 2019 at 26,816, a gain of only 0.75% in 21 months.
Gold closed at $1,352 on Jan. 26, 2018.
Gold closed at $1,488 on October 11, 2019, a gain of 10.1% in 21 months.
The Fed announced they would buy $60 billion/month in Treasuries but refused to admit it was QE. Sounds like welfare for the upper 1%...
Look back at 1965
. The London Gold Pool held the price of gold at $35.00.
Average wage: $2.60/hour
Cost of a new truck: $2,000
Total credit market debt: $1,110 billion
The Vietnam War escalated, President Johnson pushed social programs, and politicians spent freely to reward cronies.
Problem: The U.S. had spent so much on the military, wars, and social programs that debt and prices surged higher as the dollar devalued. Foreigners realized the dollar was worth less than 1/35 of an ounce of gold. They wanted to trade paper dollars for real gold.
Look back at 1971
. The London Gold Pool had collapsed, and gold prices “skyrocketed” to $44. Foreign central banks wanted U.S. gold instead of paper dollars. The official U.S. gold hoard had fallen from 20,000 tons to over 8,000 tons, according to unaudited records.
Average wage: $3.62/hour
Cost of a new truck: $2,900
Total credit market debt: $1,749 billion
The South-East Asian War escalated, and politicians spent to reward cronies.
Problem: The U.S. spent excessively on the military, wars, and social programs. Debt and prices accelerated higher. Foreigners wanted gold instead of paper dollars. Under advice from central bankers,
President Nixon “temporarily” stopped exchanging dollars for gold. During the next decade the dollar collapsed in purchasing power, consumer price inflation devastated many households, and currency in circulation expanded rapidly.
Look back at 2001
. Gold had been in a bear market for 21 years and had fallen 70% from its bubble high in 1980. The dollar was strong, and the U.S. planned to invade Iraq, Afghanistan, Syria and Iran.
Average wage: $14.66/hour
Cost of a new truck: $20,000
Total credit market debt: $30,105 billion
The Middle East Wars escalated, and President Bush supported military contractors and drug companies. Politicians spent to reward cronies.
Problem: The U.S. increased spending on the military, wars, and social programs. Official national debt increased to about $6 trillion. The stock market had crashed in 2000, and the Internet bubble, inflated with “printed currency units,” imploded. The Fed introduced other bubble-blowing policies. Within seven years Americans would suffer another housing bubble and crash, and a stock market bubble and crash.
In October 2019
gold had been in a bear market from 2011 to 2016 and had fallen 40% from its all-time high in 2011 by early 2016. The forever wars in the Middle East and Afghanistan continued, and the nation polarized more than any time since the Civil War.
Average wage: $23.00/hour
Cost of a new truck: $45,000
Total credit market debt: $74,100 billion
The Middle East Wars escalated, while President Trump reduced taxes and supported military contractors. Politicians spent to reward cronies.
Problem: Spending for the military, wars, and social programs expanded further. Official national debt increased to about $22.6 trillion. The stock market, inflated with “printed currency units,” was near another all-time high. The Fed used new bubble-blowing policies in September and October but denied they were QE or “Inflate or Die” support for a fragile economic system.
WE KNOW THAT:
- Deficit spending, larger debts and wars are continuous.
- Politicians support their cronies and contributors.
- National debt has grown exponentially, about 8.9% per year for many decades. At this rate national debt will exceed $40 trillion well before 2030. A recession, new wars or socialistic politicians put in play $50 trillion in debt by 2030.
- Prices and wages rise as bankers and politicians devalue dollars. The bottom 90% are not wealthier, but the numbers are larger.
- Gold prices rise as excessive printing of currency units devalues the dollar. Politicians and central bankers respond by creating distractions.
- The U.S. economy runs on debt and credit. When corporations want to boost stock prices, they borrow and buy back stock. When politicians “need” a new program, they pass legislation, borrow the cost and increase debt. To pay the interest on past debt, the U.S. government borrows more and adds to total debt.
- If this nonsense sounds crazy… then you understand!
Debt expands because the population increases. There should be more debt and more currency in circulation every year. Debt expands slightly because of population increases but primarily because of excessive borrowing and spending.
The St. Louis Fed tracks debt. Divide total credit market debt by population and observe the massive increase of debt per capita. See log-scale graph below of population adjusted total credit market debt.
Divide gold prices by population adjusted total credit market debt. The ratio has remained within a narrow range, except for bubble years before and after 1980.