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Showing posts with label devaluation. Show all posts
Showing posts with label devaluation. Show all posts

Wednesday, August 10, 2016

Gold has never been cheaper in relation to the dollar in the history of the U.S.

When you measure gold versus any currency the thing you must always do is compare it to purchasing power rather than the 'price'.  For example, the price of gold in relation to the Euro and Yen is currently right near their all-time highs but the price in relation to the dollar is still 35% below that level.

Additionally, and since we live in an era where all currencies are fiat and backed by nothing, one must expand upon this 'purchasing power' balance scale and look at the price in relation to different periods of the currency.  This is because over time the currency will intrinsically become devalued, and you can find a relationship between the price from say 70-100 years ago, and the price relation today.

On Aug. 9 Bill Holter discovered a chart that compared the price of gold in dollars through a historic outlay that goes back to 1913 when the Federal Reserve was founded, and when a central bank began controlling the nation's money.  And what you see in that chart is astounding as the devaluation of the dollar, and increase to the money supply has become so great, that gold in dollars are now cheaper than at anytime in America's history.

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Let’s start by deconstructing this down to what it really means. First, I must confess I do not know whether this chart is comparing the “priced” amount of U.S. gold to the monetary base or rather the price of gold to the monetary base (because the axis is not labeled). Either way, this chart tells us something VERY important! 
The price of gold relative to the monetary base has never been lower than it is right now other than the at the end of last year. 
Looking at the chart, you can clearly see the “markup” of gold in 1933 from $20.67 to $35. You can also see the run from $35 to $850 during the 1970’s and peaking in 1980. 
You can also see the turn in 2000-2001 when gold traded down to $256 per ounce. These were very important generational turns but we can glean something even more important from this chart. In relation to the monetary base, you can now purchase gold below $20.67, below $35 and below $256 when adjusted for the monetary base outstanding! The monetary base has grown and grown for 100 years, it has exploded in the last 8 years. - Silver Doctors

Monday, June 13, 2016

Adjusted for inflation, the real value of gold against the dollar should be over $7300 per ounce

When the Federal Reserve took over control of the U.S. monetary system in 1913, the price of gold in relation to dollars was $20.42.  But over the past 103 years, that central bank has devalued the currency by more than 98%, eroding the purchasing power of the dollar through inflation for the products and services we buy

Yet it is interesting that while price inflation has occurred on a relatively equal basis for most items in the economy, and for the commodities and resources that businesses consume, gold has not risen in equal proportion with everything else.

The Debt Clock is an algorithm that approximates the second by second increase in America's national debt, as well as several other monetary factors that are tied to our dollar system.  One of these elements is the estimated real value of gold, which in relation to dollar devaluation over the past 100 years, should be over $7300 per ounce when adjusted for inflation.


In the lower right hand corner is the algorithm that estimates the value of gold, and the relation between the true gold price and the dollar.


And while none of these numbers are actually official, they provide a very good barometer for the erosion of the dollar as a medium of exchange for goods and services, and what the value of gold should be if it had been left to rise in price on the open market without government, central bank, and market intervention.

Thursday, January 7, 2016

China stock markets halt completely after Yuan devaluation

It appears that the new Chinese circuit breakers came at just the right time as the Shanghai equity markets triggered a halt on Jan. 7, leading the Far Eastern power to close down the markets altogether after just 30 minutes of trading.  This is the second circuit breaker halt in three days for China, which implemented the market protection at the start of the new year.
What appears to have been the catalyst for this market collapse was a devaluation of the Yuan, which was dropped by the PBOC the most since last August.

Read more on this article here...

Saturday, August 15, 2015

China’s devaluation just the start as countries rev up for next leg of currency war

The currency war in the global financial system has been going on at varying strengths since 2009, and in full gear since 2013 thanks to Japan and Abenomics.  However, with the world’s most important industrial economy showing signs of a severe crash, or at the very least an acute slowdown, China’s new devaluation policy is expected to ratchet up the currency wars to a whole new level.
For years the Chinese Yuan has been pegged to the dollar, and has ebbed and flowed as the dollar both collapsed between 2008-2009, and strengthened to its current level of 96 over the past year.

But with deflation and a slowdown in consumer spending signaling that the world is now in a new recession, China had to act to protect their lifeblood of production against a myriad of economies that have already devalued their currencies multiple times in the past three years.

Read more on this article here...