Dollar's Worth

Meet The 22 Economists That Want To Kill Your Purchasing Power

This is why Bitcoin is soaring, while gold and silver will. The Fed will raise their inflation target to 2%, benignly in their opinion. Keynesian economists will be the downfall of US citizens.

http://www.zerohedge.com/news/2017-06-09/meet-22-economists-want-kill-your-purchasing-power

Purchasing Power of the USDollar vs. Gold and Oil

Click on Image to Enlarge

Inflation's Effect on Our Grocery Cart.

Inflation robs from everybody, especially the poor and the middle class. The Fed and US Treasury don't stimulate the economy by printing money out of thin air. Instead, the unintended consequence is they stifle economic growth because they cause consumer prices to rise, despite the BLS official statistics citing low inflation.

Tapped out consumers are faced with rising costs across the board. Have healthcare, tuition, gas, food prices declined for anyone? No. The public has been brainwashed into thinking there is no inflation, because the daily movements are imperceptible. But there is no doubt our purchasing power is slowly being destroyed by the Fed's monetary policies. A look at our grocery cart reveals the truth.

Click on Image to Enlarge

 

 

Expect Stunning Global Expansion Of Government Theft

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/20_Expect_Stunning_Global_Expansion_Of_Government_Theft.html

What Costs How Much, Where? Presenting The "Apple Index"

This is a real-time thermometer of inflation.

http://www.zerohedge.com/news/what-costs-how-much-where-presenting-apple-index

Presenting The Fed's Slogan: "Making It Harder To Feed Your Family For 98 Years And Counting"

http://www.zerohedge.com/article/presenting-feds-logo-making-it-harder-feed-your-family-98-years-and-counting

Seniors Have Lost 32 Percent of Their Buying Power Since 2000

http://www.prnewswire.com/news-releases/seniors-have-lost-32-percent-of-their-buying-power-since-2000-122205249.html

Pensions and inflation

Let me just throw it out there.

1) Pension funds are at risk--all of them, some more than others.  If you're under the age of 60, so is Social Security.  I've been saying this for years, despite some very smart people refuting me.  We will see who is right on this, but the chorus of alarm bells is growing in my favor.

2) Inflation will wipe out those on fixed incomes, especially retirees.  Again, the audience has been tone deaf to my exhortations.  Recent price increases point again towards inflation--not deflation.

As the previous blog/article mentioned <click here>, protecting one's purchasing power now requires citizens to become speculators, as the Fed has artificially kept interest rates--and hence bond yields, low.  This helps the Fed's bloated balance sheet, but it destroys the living standards of US citizens on fixed incomes.

As a result, protecting one's purchasing power unfortunately now must include unconventional investment strategies, as the central bank debases the dollar in an unsuccessful attempt to close the huge fiscal gaps.  Our country's debt will destroy its citizens' purchasing power--it's just a matter of time before people realize it, and most people will realize it after it's too late.

The government can fool the majority of the people for only so long.  Declaring inflation is only 2% when it's actually closer to 10% doesn't work when folks see prices at the gas pump increase 100%.  People will eventually realize that unemployment is not the officially calculated 9% but actually 22%--all they have to do is look around.  And now that top government and banking authorities are sounding the alarm bells <click here>, even while Congress hmm's and haw's, it is time to take notice.

With the increasingly corrupt and stringent FDA killing off promising biotech companies, the only growth industries left in America are bankruptcy law and building IPhone apps.  Add to that list oil, natural gas, agriculture, some technology, and precious metals mining companies.  We will see how long Apple, Google, and NetFlix can carry the US economy.  Hint:  not for long.

An 1801 - present USDollar chart

A declining USDollar = diminishing purchasing power = price inflation. This chart tells enough.

Now we look at Siegel's calculation of the dollar's purchasing power from 1801 to 2008. It's a measure of inflation over more than 200 years.

In periods of inflation, which reduce the value of a dollar bill, the line falls. In periods of deflation, which increase the value of a dollar bill, the line rises.

This chart's message: In the 19th century, inflation and deflation alternated wildly, but the dollar remained roughly in the same range.

In the 20th century, inflation won out decisively -- except for the relatively short interlude of the Great Depression.

Because of this 20th-century experience, the value of the dollar has fallen precipitously, to a recent 6 cents. By an astonishing coincidence, the decisive move began about the same time as the Federal Reserve did.

Safe havens

The USDollar has been a safe haven asset since the Bretton-Woods agreement in 1945. To many, it still is, when all other assets decline in value in a risk-adverse investment environment. Don't be fooled by Wall Street's head fakes. The US government's finances are stuck between a hard place and a rock. We are not out of the woods--not even close.

Consider precious metals as a haven. Gold and silver got clocked today, much like every other asset. This is a knee jerk reaction as panic selling kicks in during a liquidity crunch. Cooler heads will re-discover gold and silver are historically reliable stores of value. Precious metals were the first to recover in the 2008 liquidity crisis. They'll be the first to recover in the future. Stay the course. Accumulate on dips, if you can. Go watch a movie, and stop watching the daily fluctuations. Because one day, when the debt crisis turns into a currency crisis, your purchasing power will still be protected.

Two good articles:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ay7aVAKL6qYw

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97226&sn=Detail&pid=1

See disclaimers on the sidebar.

Disclosure: long gold and silver mining shares.

President Nixon was a crook--and a liar

In this classic video, President Richard Nixon lies on almost every point regarding removing the gold standard. Note that since 1971, the USDollar has lost 97% of its purchasing power relative to the price of gold.

Diminishing purchasing power of the USDollar

If a picture is worth a thousand words, this graph may be worth several trillion dollars. Guess when the Federal Reserve Bank was established? Look where the US Dollar falls off the cliff. 1913 would be the correct eyeball guess.

In 1933, Franklin Delano Roosevelt confiscated American citizens' private gold in exchange for $20.67/ounce, and then immediately reset the new price of gold at $35/oz. Americans who complied (non-compliance carried a $10,000 fine and 10 years in prison) immediately took a 40% loss in their cash holdings as a result. And thus, Ft. Knox was created.

Fast forward to 1971, when Richard Milhouse Nixon removed the USDollar from the gold standard completely, as the Treasury couldn't meet redemption demands, due to large deficits run up by the Vietnam war.

Hence, we have a nice trajectory for our graph--that is, if you like ski slopes.

CNBC--the Ultimate Contrarian Indicator

The Business Week contrarian indicator is fairly well-known among savvy investors. The theory goes like this: whatever investment is touted on the cover of Business Week, sell it, because by the time the mainstream audience gets wind of it, it is too late, and expectations have reached a manic peak. Likewise, when the cover story of Business Week declares disaster for a certain asset, a bottom is near and it may be time to buy it. In other words, Business Week is a "Wrong-Way Corrigan" indicator--doing the exact opposite of what Business Week urges investors to do is usually enormously profitable, as it sends signals for inflection points.

I believe CNBC has replaced Business Week as the ultimate contrarian indicator, because following the economy and finances has become America's past time. More Americans are becoming literate in financial matters--even when they are learning the wrong things. And CNBC is the flagship business network.

Predictably, CNBC is on permanent bull market mode. From Kudlow to Cramer, and other pundits and journalists in between, they tend to be overly bullish. And their content couldn't have predicted the stock market peak any better. Right before markets worldwide cratered last fall, CNBC was running special programs investigating how hedge fund managers were becoming super wealthy. They also had specials running on Warren Buffett, the world's best long-term investor. Both hedgies and Buffett's Berkshire Hathaway shares have cratered since.

I even saw a business show declaring how Iceland was now one of the wealthiest countries in the nation last year. Today, they are completely bankrupt.

Shorting hedge fund returns, Berkshire Hathaway's shares, and Iceland's currency would have made you a mint last year.

Shouldn't CNBC have run specials on Wall Street fraud, Ponzi schemes, bank insolvency, billion-dollar bonuses when banks were bleeding billions, the auto industry burning cash by the billions, unscrupulous mortgage lenders, over-extended and irresponsible consumers and home borrowers, the impending subprime mortgage crisis, countries defaulting on loan obligations, currencies collapsing, or any number of indicators revealing a wave of cracks which would give way to an avalanche of financial meltdown? Where was the investigative journalism?

The investing public needed these stories before the crisis, not ex post facto. However, to investors with a shrewd eye, the writing should have been on the wall. A modest 2 bedroom, 1 bathroom home is NOT worth $2 million, no matter which neighborhood it resides. And when home prices reached ten times average incomes, something didn't smell right.

But that's spilled milk, the proverbial "looking in the rearview mirror". Let's look forward through the windshield, in order to be constructive.

What should one notice? Government central banks worldwide are printing money ad nauseum, raising fiscal Cain in the process, in an effort to prop up their local economies. This can only debase all foreign currencies in lock step. The only reason why the USDollar remains stronger relative to other foreign currencies is because as bad as our economy is (the US consumer drives over 70% of gross domestic product), other developed and emerging countries are in even deeper water. Many are export-driven, and they are not exporting goods, because the American consumer is tapped out and no longer has any credit. And many foreign banks are more leveraged than their already overly-levered US counterparts.

The biggest reason why the USDollar is stronger than the others (with the exception of the Japanese yen, which has a reserve surplus, i.e., they are savers) is because we still possess the world's reserve currency. However, our USDollar's reserve currency status is slowly eroding, as the Fed continues to print trillions of excess dollars to fund the huge bailouts.

Other sovereign banks and funds are slowly migrating to the realizing that the reign of the USDollar as the dominant currency is coming to an end. They need to hold USDollars in a flight to safety in these shaky markets, but they also realize this is a losing trade as the USDollar is being devalued.

This is one of the reasons why gold is now considered the currency of last resort. Gold has held its value to mankind for centuries, beyond hundreds of empires, nations, wars, economic expansions, economic contractions. Meanwhile, every currency over that span has been devalued--into oblivion eventually.

So when CNBC "pundits" were bashing gold last week, I had to laugh. They claimed owning gold was "unpatriotic"--literally a bet against America. Don't believe them--they are categorically and emphatically wrong.

Owning gold protects citizens from bubbles caused by reckless governments, runaway deficit spending and crippling busts. It's a vote for sound money policy that retains its value from generation to generation. It preserves your purchasing power--and your children's. It enables true economic growth--not false prosperity built on debt quicksand. It rewards successful businesses and ideas, not broken business models subsidized by bureaucracy and favoritism.

If anything, gold is the ONLY patriotic currency available to an increasingly skeptical citizenry.