Tag Archives: Currency depreciation

The next dollar problem has just arrived, by Alasdair Macleod

Posted on December 20, 2020 | 1 comment

You can tell something is dramatically wrong just by looking at Alasdair Macleod’s charts. From Macleod at goldmoney.com:

Abstract

It is not for no reason that cryptos are roaring, and precious metals are playing catch-up. In the last month there have been developments that point to a new phase of accelerating monetary inflation for the dollar, and fiat money is only just beginning to be exchanged for these inflation hedges at an increasing pace.

Hyper-inflation of the dollar is now becoming obvious to a growing cohort of investors. It is driven by factors on both sides of bank balance sheets, with evidence that large depositors are reducing their term deposits and increasing their instant access checking accounts. This appears to be behind the increase in M1 money supply fuelled out of a shift from the M2 statistic, which includes savings deposits.

It amounts to a hidden run against bank balance sheets. Meanwhile, increasing supply chain problems against a background of covid lockdowns are leading to the withdrawal of bank credit from non-financial businesses, potentially imploding bank balance sheets as a bank credit contracts.

Foreign support for both the dollar and dollar-denominated fixed interest assets are being withdrawn, which is sure to lead to rising bond yields and dollar interest rates in the New Year, undermining the equity market bubble.

The Fed is now faced with not only financing ballooning federal budget deficits, but underwriting US supply chains in their entirety, which is corroborated by ongoing global logistical problems, tying up an annualised $34 trillion of intra-business payments in America alone. The Fed’s unwavering commitment to Keynesian monetary policies will lead the Fed to attempt to offset these supply chain problems, to rescue banks that fail to survive the inevitable contraction in bank credit, and to defray the bad debts that will arise.

It is a momentous task encompassing the whole US economy, requiring even faster money-printing, and is impossible without destroying the unbacked dollar.

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Posted in Banking, Business, Collapse, Currencies, Debt, Economy, Governments

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How the Fed Robs You of Your Life, by MN Gordon

Posted on January 5, 2020 | Leave a comment

Money is the tangible store of your time and effort. Depreciating money robs you of that time and effort, your life. From MN Gordon at economicprism.com:

Today, as we step into the New Year, we reach down to turn over a new leaf.  We want to make a fresh start.  We want to leave 2019’s bugaboos behind.

But, alas, lying beneath the fallen leaf, like rotting food waste, is last year’s fake money.  We can’t escape it.  But we refuse to believe in its permanence.

Victorian economist William Stanley Jevons, in his 1875 work, Money and the Mechanism of Exchange, stated that money has four functions.  It’s a medium of exchange, a common measure of value, a standard of value, and a store of value.

No doubt, today’s fake money, including the U.S. dollar, falls well short of Jevons’ four functions of money.  Certainly, it comes up short in its function as a store of value.

Hence, today’s money is not real money.  Rather, it’s fake money.  And this fake money has heinous implications on how people earn, save, invest, and pay their way in the world we live in.  Practically all aspects of everything have been distorted and disfigured by it.

Take the dollar, for instance.  Over the last 100-years, it has lost over 95-percent of its value.  Yet, even with this poor performance, the dollar has one of the better track records going.  In fact, many currencies that were around just a short century ago have vanished from the face of the earth.  They’ve been debased to bird cage liner.

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Posted in Banking, Crime, Currencies, Debt, Economics, Economy, Financial markets, Governments, Money

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Gold’s outlook for 2020, by Alasdair Macleod

Posted on January 5, 2020 | Leave a comment

The best monetary  economist on the internet expounds on fiat currencies’ and gold’s prospects for the coming year. From Alasdair Macleod at goldmoney.com:

This article is an overview of the economic conditions that will drive the gold price in 2020 and beyond. The turn of the credit cycle, the effect on government deficits and how they are to be financed are addressed.

In the absence of foreign demand for new US Treasuries and of a rise in the savings rate the US budget deficit can only be financed by monetary inflation. This is bound to lead to higher bond yields as the dollar’s falling purchasing power accelerates due to the sheer quantity of new dollars entering circulation. The relationship between rising bond yields and the gold price is also discussed.

It may turn out that the recent extraordinary events on Comex, with the expansion of open interest failing to suppress the gold price, are an early recognition in some quarters of the US Government’s debt trap.

The strains leading to a crisis for fiat currencies are emerging into plain sight.

 

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What Turkey Can Teach Us About Gold, by Michael Lebowitz

Posted on September 6, 2018 | 2 comments

Gold is one of the best insurance policies around against the depreciation of paper money. From Michael Lebowitz at realinvestmentadvice.com:

If you were contemplating an investment at the beginning of 2014, which of the two assets graphed below would you prefer to own?

In the traditional and logical way of thinking about investing, the asset that appreciates more is usually the preferred choice.

However, the chart above depicts the same asset expressed in two different currencies. The orange line is gold priced in U.S. dollars and the teal line is gold priced in Turkish lira. The y-axis is the price of gold divided by 100.

Had you owned gold priced in U.S. dollar terms, your investment return since 2014 has been relatively flat.  Conversely, had you bought gold using Turkish Lira in 2014, your investment has risen from 2,805 to 7,226 or 2.58x. The gain occurred as the value of the Turkish lira deteriorated from 2.33 to 6.04 relative to the U.S. dollar.

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Posted in Currencies, Debt, Economics, Economy, Governments, History, Investing

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