Francs and Euros at Record Lows Against Gold; Hyperinflation; Some Bad Economic News
Yesterday I noted that gold was at an all time high against the Euro. There is another way to express this. The euro (and the Swiss franc) are at RECORD LOW VERSUS GOLD.
As if to riddle you with the question – ‘Which came first the chicken, or the egg…” Which is it? Is it that gold is going higher against these currencies, or is it that the franc and the euro are falling versus gold? That’s one of those loaded questions where both answers could be right. However, since every day society pretends that paper currency backed by nothing is the medium of exchange, the paper funny money that dominates society is what is being taken to the proverbial shredder and declining in value so that it is the haggard state of paper currencies reflecting underlying economies that is declining.
The declining paper currencies are a stark reminder that gold stands as true money in that we humans assign it an intrinsic value that can only be enhanced when it is compared to something as fleeting as paper fiat currency which has an average historic shelf life of 40, or so years.
Once upon a time there was the old saw that an ounce of gold was worth a nice suit of clothing. That is no longer that case. While some can afford $2,000 suits, there are plenty of decent suits to be had for $800. Gold is not at $800 any more because of the problem with declining fiat currency. It’s not that gold has become less valuable but that dollars have lost value that it now takes roughly a HALF-OUNCE of gold to buy a fine suit.
With trillions in planned FED balance sheet expansion, trillions in expected budget deficits and trillions in unfunded mandates expect more paper currency deterioration. So far, as the reserve currency of the world, the U.S. dollar is fortunate to be above record lows against gold, but by only a few hundred dollars. Sadly that will change soon enough.
You know, I use that word “sadly” in a very serious way. It is not as if I am cheering for the demise of the so-convenient to use dollar bill. While I realize gold will be a financial fallout shelter for future dollar implosion, I can’t be happy that severe dollar debasement is on the way, especially when I consider the future in the context for my childred ages 8, 12 and 16. Tough times lie ahead. This generation’s financial system is filching from the future generations. That’s why this is a “sad” scenario in my eyes.
As for the euro zone, a credit downgrade appears to be right around the corner. Euro Pares Gain Amid Speculation For Ratings Cut- ECB Under Pressure – http://bit.ly/Q7D785
I may be a gold fan, but this is taking things a bit too far? New Gold-Plated Case for the iPhone 5 http://on.mash.to/QXP7sj from @mashable
Do yourself a favor and buy some real financial insurance and spend $5000 on some real gold.
DON’T LOOK NOW: Goldman Cuts Q3 GDP Forecast To Stall Speed 1.9% http://tinyurl.com/czxwck7
Here’s Why You Don’t Vote Obama if you Are Concerned About the Ecoonomy. The Whole shooting match is close to unwinding. I am of the belief that the economy is being held together for the sake of a smooth election cycle. After that? Let’s hope the you-know-what doesn’t hit the fan. THE Friday PMI is your signal of a DEAD Canary in the coal mine. Only problem? Romney’s problem of gaining traction. He Should be a shoo in. The Chicago PMI Report Was One Of The Nastiest Pieces Of Economic Data We’ve Seen In A Long Time http://read.bi/SqKOEG
As I have long suspected, no deep deflationary period (not with trillions in money printing globally). Instead we are entering a portal to STAGFLATION. This also helps to explain why gold is not yet at $2,000. Yes, prices rise in a stagflationary environment over years, but at a slower pace than in a HYPERinflationary environment where prices can change hourly. I think John Williams at Shadow Stats still may be right in the long run about hyperinflation as massive reserve creation will eventually impact the economy by destroying the dollar, but Mr. Williams has been too early. We are not Zimbabwe, nor are we the Weimar Republic. Thus far, money creation has been for the direct benefit of the banking and shadow banking systems. The Helicopter dropping of cash has not been directed to Main Street America. As long as labor market deflation continues and wages adjusted for inflation remain supressed, the hyper inflationists will have to wait for their grim scenarios to unfold.
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Author Jim Kingsland
Market commentator with focus on Gold and Silver after long broadcast career at FNN, Bloomberg, and Fox. #RandomHouse published author on PMs. Jim has also been involved in projects for CAC and Coinplex.
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