Professor Mark J. Perry has a chart on his blog,
Carpe Diem that explains all you need to know about "high gasoline prices." When measured against gold, the price of oil is below its historical average. This can only mean that the value of the dollar is falling, which is reflected in the increasing price of oil.
To be fair, most of the world's currencies are falling against the price of gold, or oil at this time. However, it doesn't change the fact that oil and gold, as materials that contain intrinsic worth, don't deviate in their value whereas fiat money, such as the dollar only loses value over time.
Funny, I just had this conversation this weekend! It seems that gold is not holding its normal inverted relationship with the dollar and our stock market.
ReplyDeleteIt could be a measure of American financial weakness or the relationship has shifted to a basket of currency due to the Feds commitments to Europe.
It is a bit hard to get to the bottom of.
That is an interesting chart. Why should gold not deviate from in its value like any other commodity subject to supply and demand? While thumbing for a chart, i came across this article on the matter http://www.goldinmind.com/gold-updates-news/blog/10-charts-10-stories-of-the-real-gold-price.html
ReplyDeleteDoo Doo,
ReplyDeleteBabbling heads often speak of "the dollar" meaning against a basket of currencies, e.g. "the Dollar Index."
We are now a few years into a game of global competitive devaluation. All currencies are going down compared to oil, gold, farmland, etc. If the dollar is falling slightly slower than the Euro, I wouldn't call that "rising" as the babbling heads do.
Stocks, like gold, rise in nominal price as the dollar falls. But stocks have a lot of economic problems (and fascist regime risk) right now, so gold has been holding up relatively better.
I think people ought to be diversified enough to own both stocks and gold. If the Obama regime goes full Chavez after the election, you might want to be able to get some wealth out of the country on the down-low. Even barring authoritarian regimes, gold could well continue to outperform stocks for years if Bernanke destroys confidence in the dollar while the economy still sucks.
I recommend everyone own some physical gold. Start by picking up a coin at <a href="www.libertycpm.com>Liberty Coin</a> in Del Mar.
Doo Doo,
ReplyDeleteBabbling heads often speak of "the dollar" meaning against a basket of currencies, e.g. "the Dollar Index."
We are now a few years into a game of global competitive devaluation. All currencies are going down compared to oil, gold, farmland, etc. If the dollar is falling slightly slower than the Euro, I wouldn't call that "rising" as the babbling heads do.
Stocks, like gold, rise in nominal price as the dollar falls. But stocks have a lot of economic problems (and fascist regime risk) right now, so gold has been holding up relatively better.
I think people ought to be diversified enough to own both stocks and gold. If the Obama regime goes full Chavez after the election, you might want to be able to get some wealth out of the country on the down-low. Even barring authoritarian regimes, gold could well continue to outperform stocks for years if Bernanke destroys confidence in the dollar while the economy still sucks.
I recommend everyone own some physical gold. Start by picking up a coin at Liberty Coin in Del Mar.