The silent investment story of the year is the collapse of the U.S. dollar against the Swiss franc, Canadian dollar and Swedish krona. The dollar’s decline has been breathtaking, and the fault, as always, lies with the Fed.
Chairman Ben Bernanke assures gullible citizens that he is not “printing the money.” But take a gander at my chart — Adjusted Monetary Base (high-powered money) and Excess Reserves. Parabolic curve comes quickly to mind.
For the Fed chairman to B.S. the citizenry with his “we’re not printing the money” is cause for Mr. Bernanke to look for another line of work. Let me be clear: The Fed’s monetary malfeasance has caused yet another catastrophic bubble.
Governments Distort Economic Stats
My theoretical monetary price for gold is now $11,226 per ounce. At such a price, central bank monetary reserves would be backed one-for-one by gold.
Is this a fair price for gold?
The market decides, as long as central banks are not manipulating gold’s price, which happens from time to time. Central governments worldwide are all about manipulation. China is conducting a campaign of deliberate undervaluation for its currency, and I do not believe official Japanese economic reports. Japan is too much of an export power to be dragging along at home like the government reports (pre tsunami).
Here at home, we torture the Consumer Price Index (CPI) to mask the true rate of price inflation. And I do not think much of the official unemployment rate. It masks the true rate of underemployment.
As for my monetary price of gold, it measures worldwide debasement of fiat money. When the compound growth rate of central bank currency reserves is an astonishing 13.5%, fiat money debasement is in the air — no ifs, ands or buts.