If you’ve been wondering why gold hasn’t fallen into a deflationary funk, the answer is becoming clear, although in slow-motion. Not only are several international banking groups giving gold new respect but now the republican party convention may adopt a platform which would call for an audit of the Fed and reasserting a link between the dollar and gold.
One reason for the surge in gold prices this week: The Fed is sounding in the FOMC minutes like they are open to another quantitative easing of the money supply. In other words, they are likely to print more money – and this watering down of paper money’s purchasing power is what makes it seem like prices are going up.
The truth – and not very well taught in politically-correct schooling these days – is that prices don’t really go up – so much as there’s just more and more paper chasing the same goods and services so it takes more paper.
How much more paper? Well, since the Fed got into the business of renting America its paper money, back in 1913, what used to cost $1-dollar now costs $23.52. Which is why in 1913 a steak dinner was $1 and today it’s about $23-$24 for the same thing.
Plain as I can tell you: A dollar is only worth 4.2517 percent of what it was in 1913. Almost 96% of its purchasing power has been watered down by too many paper dollars floating around. But without that kind of accounting, what government services would you like to do without…since that’s largely made possible by deficit spending and the fine art of “making up money.”
Not that inflation is bad, mind you: Properly used it’s a great social escalator since it allows regular people to (in effect) bet with the house when buying real estate in inflationary times for 10- or 20-percent down. But, as millions learned in the Housing Bust of 2008-present, when the tables turn and deflation comes along, things get painful in a hurry as leverage cuts both ways leaving many “upside down” in their home mortgages.
Is linking to gold the answer? Maybe – but maybe not. Should annual debasing of the money supply be publicly announced and stable fiscal policy – not subject to political winds and banker whims? You bet.
Systemic inflation has averaged about 3.24% per year since the Fed came along.
But they don’t hold up big signs saying “Don’t get into high leverage here because we’re going to actually shrink effective money supply for a while.” As a result, regular people suffer real fiscal harm and some linkage to gold would make the print or hoard activities of the banker class a little more apparent and easier to follow that Q.E. gibberish and FedSpeak messages.
If you get some time, you might want to read up on the inflation-adjusted housing price work of Robert Shiller (and Karl Case with contributions from Allan Weiss) since the new Case-Shiller/S&P Housing Index numbers will come out next week.
Basically what their work showed was that over the past hundred years, or so, on an inflation-adjusted basis housing prices haven’t changed much – with the exception of the 2000-2008 percent where we had an unprecedented run-up in prices.
What goes up is still coming down…and if there is one concern to be had about the re-tying of gold to paper money it is that this was the kind of thing that led to gold and silver confiscation in the last Depression. But then, you knew that, right? Executive Order 6102.
In the New Depression the issue is more interesting: Hoarding of cash and equivalents in dead pools of capital…ought to be fun to see how government tries to get the One Percent to put some of their dough back into circulation or whether, like the 1930′s, there’ll be another attempt to screw the little guy. My, would that be a surprise?
Numbers to Ponder
Household incomes have continued to fall under the Obama administration according to new analysis out. Median incomes down 7.2% from where it was in December 2007 which is why the old saying “The harder I work the behinder I get” is no joke.
Just out from Census this morning:
New orders for manufactured durable goods in July increased $9.4 billion or 4.2 percent to $230.7 billion, the U.S. Census Bureau announced today. This increase, up three consecutive months, followed a 1.6 percent June increase. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders increased 5.7 percent. Transportation equipment, up five of the last six months, had the largest increase, $9.9 billion or 14.1 percent to $80.4 billion.
Shipments of manufactured durable goods in July, up seven of the last eight months, increased $5.9 billion or 2.6 percent to $231.1 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a slight June increase. Transportation equipment, up four of the last five months, had the largest increase, $5.4 billion or 8.4 percent to $69.7 billion. This was also at the highest level since the series was first published on a NAICS basis and followed a 1.0 percent June decrease.
Unfilled orders for manufactured durable goods in July, up two consecutive months, increased $7.8 billion or 0.8 percent to $996.3 billion. This followed a 0.4 percent June increase. Transportation equipment, also up two consecutive months, had the largest increase, $10.7 billion or 1.9 percent to $581.0 billion. “
Some previous monthly data was revised down…but the increase in the headline number was more than expected so an up move at the open is expected.
Killer Gets Time
The fellow who killed 77 people in Norway a while back Ander Behring Breivik has been found “sane” and guilty.
What amazes me is that people in Europe don’t see this case as symptomatic of why Europe is in a financial mess. Kill 77 people and get 21-years in jail? Oh, sure, may be extended if he is still a “threat to society” but come on! Sheesh! Capital punishment is way more cost-effective. No repeat offender worries, either.
The Royal Long (and Short) Of It
A Better Murdoch?
Seems Rupe’s sis Elisabeth doesn’t buy into “profit without purpose” like someone else in the family.
Sport: Armstrong Gives Up
Word is that 7-time Tour de France winner Lance Armstrong could be stripped of his titles as soon as today after the US Anti-Doping Agency said it had enough testimony and data to make its claim stick that Armstrong had won his titles using doping.
But Armstrong’s side of the case is different: Where are the physical evidences needed? After all, he passed every test with flying colors. But by the sound of it, this is one of those cases where the person being attacked (Armstrong) just doesn’t have the will to keep up the fight. Calling it runaway government and unconstitutional, Armstrong’s giving up on arbitration in order to preserve his family and private life.
Now that 200,000 have fled from Syria, we note the Al Jazeera story about an increase in violence in Lebanon as a result.
Meantime, well-connected Debka reports US and other chemical weapons teams are standing by to ensure that chemical weapons in Syria don’t fall into the wrong hands. And while this is going on, Russia says they won’t sanction Syrian use of such weapons..
Hugo’s Worker’s Paradise
Turns out that Venezuela is now importing gasoline despite having some of the world’s largest reserves. We’ve made a note to get Hugo SimCity and Petroleum Tycoon for Christmas….he could learn from some vid-games.
More after this…