Inflation Unchained: Part Two

Ben Hurt
Gold Market Discussion

Currencies are Being Inflated to Eventual Worthlessness

In our last post, we wrote that “A hundred years ago a dollar bought roughly 0.05 ounces of gold.  Today the dollar buys only 0.00077 ounces of gold.”

“Something changed, but it wasn’t the gold.”

Of course, the same kind of value destruction that has taken place with the dollar has taken place with currencies around the world.  That is why gold today is at or near all-time highs in 72 world currencies.

Currencies are being inflated to eventual worthlessness.

In our last post, we explained that a rising price is not inflation.  It is simply a rising price.  If the price of oranges goes up because of a freeze in Florida, that is not inflation.

If recent technological advances make new electronic miracles, like flat-screen HDTVs, more affordable, that is not deflation.  It is a drop in prices in one sector.

The classical economists understood this.  They understood that inflation is a monetary phenomenon.  Sustained price increases throughout the economy reflect state meddling or corruption of the supply of money and credit.  Governments engage in these practices for a number of reasons.  They may wish to spend more and hide the increased taxation of the people by simply printing the money.  They may wish to devalue unpayable government debt by devaluing the unit of account of that debt and pay it down with cheaper money.  Or the may wish to subsidize powerful financial interests and cronies with an inside line on monetary interventions.

Sometimes they may wish to do all those things at once.

This explains why governments hate gold.  The cannot print more gold or wave a policy wand and double the amount of gold in government warehouses.  Gold provides financial discipline on states and politicians.  

Politicians and governments around the world have gotten away with their monetary shenanigans for a long time, but the game in almost up.

Preferences are shifting everywhere.  They are shifting from paper money to gold.   Ross Norman, the CEO of Sharps Pixley in London, reports that the price of gold is at an all-time high or within a few percent of an all-time high in 72 currencies around the world.  That means that each of those currencies buys less.  

It means that those currencies are all falling against the most reliable monetary standard in history:  gold.

Inflation has been Unchained Around the World

If currencies buy less gold, they will eventually buy less of just about everything else.

That goes for the dollar, too. 

We recommend that you keep your wealth in real money that cannot be corrupted by politicians and central banks.  And we recommend that you make the move now, while you can.