Side bet on a 100 point gain today? This is like a no-brainer: The US dollar is sinking quickly back down toward the 0.75 Euro area and as the dollar loses strength, it takes more of them to purchase an ounce of gold, so we see (Quick! Look surprised!) gold going up this morning.
And, since the theory is that stocks are somehow priced like physical assets in an inflationary period (think about an apartment house, for example), when the purchasing power of the dollars goes down stock prices go up because they are simply reacting to inflation – which is what you call a dollar losing purchasing power. You following this? Dollar-power down, the number of dollars needed to buy an asset goes up. Simple stuff your broker doesn’t mention.
So, here’s (once again) the ugly, simple, undeniable hard fact that almost no financial site talks about: If you had purchased $100 worth of some hard asset in 1913, it’s price today would be $2,219.19 just based on the watering down of the nation’s money. Yup.
So, in the very short term, I expect a bid drop in the Dollar over the next couple of weeks, with a resultant rise in the stock market, since it will take more of these soon-to-be-cheaper dollars to buy the underlying (hypothetical) assets. And then, come January when the dollar rallies to 0.82 Euro and the EU gets back to imploding, we should see a nice beat-down of stocks, gold, and other ‘hard assets’.
All of this is just too damn simple, so we see headlines about like “World stocks rise as China rate hike fear fizzles.”
Or, you might believe that AP analysis piece claiming “Economic stress falls to 18-month low” which could be painted as a reason for optimism.
Oh, sure, the market may bounce around a bit on this kind of news. And it’s sure to bounce around tomorrow when the Producer Prices come in along with retail sales and then tomorrow afternoon we get another FOMC decision (no move, way I figure it). Then Wednesday, we will see the consumer price report and industrial production and capacity utilization from der Fed.
By Thursday, we’ll see weekly job numbers and housing starts, and then Friday we suffer through Leading Economic Indicators (LEI) which I’ve always viewed as a clever anagram.
So pardon my snoozing through most of the week on autopilot.
Still, the mailbox fills up with people noticing the same kind of thing:
“good morning george hope all is well i have a long term inflation/currency deflation question for you
since the first minting of the morgan silver dollar in 1878, how much value has our currency lost?
i see alot of speculation as to where the price of silver is headed morgans were selling through ampex friday at 31.50 or so, implying a loss of the original silver dollar of 97% of its purchasing power vs. the underlying silver itself does this jive with your numbers for loss of purchasing power over that length of time? gold at 1400 vs. the original value of a 20 gold piece has the loss at north of 98.5% of its purchasing power
this kinda implies to me that our currency has run its course gold at 2000 means 99% loss of purchasing power we are working with a natural limit to the loss of purchasing power…..you cant lose 100% of your purchasing power and still have a functioning currency at all so gold 2000 might as well be gold 10,000 or silver 500….at this point it doesnt even matter any more, or does it?
i’ve got eight sets of vice grips pinching me purple as it is and i cant find a way around the thought that our currency is already toast are metals just playing catch up now, with what is already a foregone conclusion? if our currency is done, and 90% of the people have NO metals, 1% have 99% of the metals, and a small group has the remainder, who is gonna trade with who with this small amount of circulating gold and silver? can it get to the point that it is so valuable, that it has no value at all?(as a mode of exchange) for example, would you trade your house for an ounce of gold, even if it was a million dollars an ounce?
Pick up one of those Morgans, for a minute and give it a heft. Weight? 26.73 grams. Which converts to 0.942873 ounces.
BUT, remember the Morgan is only 90% silver, so a Morgan is .8485 ounces of silver. Now we’ve got to make a judgment call here. The Morgan was $1 dollar of purchasing power when minted, and if it’s 31.50, then the dollar only has 3.174 percent of its purchasing power left compared to 1878.
On the other hand, on an underlying melt value of the Morgans as of last Friday according to Coinflation.com was $22.1825587… Which I’m lazy enough to round off to 4.508 percent of its value.
Morgans give us some interesting data, when considered this way, because it matches up almost perfectly with the Fed’s long term data which shows from 1913 that inflation would have put that Morgan at $22.1919. Very, very close to the Coinflation.com melt value.
Your use of ViceGrips is admirable, but unnecessary. All you need to do is watch the relationship of the metals to the land. So, if, for example, we were to see “million dollars an ounce gold’ would Elaine & I trade it for a bigger place? Why hell yes! I want something with a runway, LOL.
Values are always relative. So do I think gold and silver have a long way up to go? Well…..
One metric is that an ounce of gold should buy 5-acres of land. Around here, that land is running $4,500 per acre, so that would make gold worth what? $22,500 an ounce?
“No so fast, slickery George…what about the saying that one ounce of gold should buy a good man’s suit?
Ah…you saw the story in The Hindu that the high end suit-makers of India are coming out with suits that go for RS55 lakh (a lakh I’m just so sure you remember is 100,000 Rupees…) so that pushes out to 5.5 million rupees (INR) which pencils to $122,276.57 US dollars.
Not that I’m saying that good a suit. But $10-grand a suit isn’t so crazy anymore, is it? Or, gold of $5-10 large per ounce. Suits us, just fine.
Don’t know if you’ve seen the video “The Day the Dollar Died” on YouTube, but it’s worth a look if you haven’t…
An Odd Bombing
What’s being told as a terrorist suicide bombing in Sweden doesn’t quite pass the ‘smell test’ around here. Not only did a planned car bomb explode without killing anyone, but the bomber ‘blew himself up’ about 15-minutes later ’300 yards away’.
Toss in the supposed email warnings in advance and something just doesn’t feel right. Perhaps it’s because in densely occupied Sweden, you’d almost have to work at not killing people with a car bomb, or if the alleged bomber was going to target first-responders he was too far away, but obviously if he wasn’t going to be nearby, why not further? Something just doesn’t feel right.
Speculation runs to Sweden’s support of the Afghan conflict and retribution for anti-Muslim ‘art’.
The way I have it figured, and this is only hypothecation, mind you, it sure seems coincidentally timed around WikiLeaks and the Julius Assange case (can you spell ‘pressure’?) not to mention Sweden’s key role (as outlined in the Wall St. Journal story of last week) as “…Europe’s Most Willing Lender.”
A little too conveniently timed if you follow the money which is what we do around here now and then…
Public Policy Question
Electronic Frontier Foundation has a piece on the reading list: “The FBI Arbitrarily Covers Up Evidence of Misconduct: Is This the Transparency Obama Promised?”
Texas’ Male Mice Fathers…
Not sure how they managed this, but the CBC reports “Baby mice produced from 2 males”. Right here in Texas, at that.
We won’t ask about how the delivery went (if at all) but we’re becoming more and more worried about people wandering around this time of year saying in hushed tones “…Not a creature was stirring, not even a mouse…” Is this why?
Not only is Texas a dangerous place for mice, but did you see the headline at the Houston Press site alleging “Texas is selling your baby’s blood without consent, lawsuit says.”
Then there’s the emerging details up in Lubbock about a cattle brokerage that has gone under and in the process, sticking it to cattlemen for something like $130-million, says a Bloomberg report. Wonder if that will result in higher meat prices a year or so out, if some of the cattle outfits up that way go under and herd sizes come down?
Texas Guns in Mexico Battles
Big story in the Washington Post today about how eight out of the top 12 gun dealers supplying arms to Mexico (drug dealers) are coming from care to guess which state?
See KOMO News’ story out of Seattle “Suit: Chase Bank ransacked home of man on his death bed“.
Chase is the biggest US bank, followed by BofA, Citibank, Wells, and US Bank.