US Dollar Valued In Gold Since 1718

How many ounces of gold can $1000 buy?

The answer over time is instructive. Here is some knowledge about money.

It is remarkable how few economists really understand this, and what it means, what it implies. 

Here is Paul Krugman's opinion on the currency war and the US dollar in a recent piece called Godwin and the Greenback.    I think it speaks for itself, approaching the language of economic jingoism.

And he is certainly not the worst economic voice out there, which is what makes this so disconcerting.   At least he is not an austerian, those who would crucify the public for the sins of the one percent.

Thanks to my friend Nick at Sharelynx.com for this.

Nick impishly added in a note that the US defaulted on its gold obligation in 1933 and 1971, a 38 year gap.  And it has been 42 years, so we might be due again.  

I am not a great believer in cycles.  But I am a confirmed believer in what Thomas Mann called the stupidity of cleverness as being among the worst forms of foolishness. It is the capability of knowledge, but without wisdom and sound judgement.

We seem to have a surfeit of clever ones eager to play fast and loose with the nation's currency these days as a means of pushing off genuine reform, and delaying the reckoning between the people and the banks, and the powerful few that control them.

Postscript (Oct25):    In discussing this chart further with Nick, I think the data is accurate back to about 1790 or so.  As you may recall, the US used various forms of currency prior to declaring its independence.  As someone might wish to extrapolate what a currency might have been, relating it to other currencies, so this is what I think has been used prior to 1792.  

I would have preferred not to have used it since it adds *nothing* to the analysis, but it is not my call.  However I do not agree that this valuation is good prior to 1792 because I do not understand the method that was used to derive it.  That does not mean it is wrong.  It means that I have less confidence in it that the rest of the chart because it is based on a derivation that I have not examined.

Gold Daily and Silver Weekly Charts - Don't Fear the Reaper

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood.

For these few gold has been the asset of last resort."

Antony C. Sutton


"Like liberty, gold never stays where it is undervalued."

J. S. Morrill

Gold and silver were being capped most of the day on rather light volumes.

The CME inventory report for yesterday shows JPM was again the reaper for the bullion banks, bringing in 32,150 ounces of gold bullion to customer storage.   It appears that 1 bar each left the customer vaults of HSBC and Scotia Mocatta.  There was no change to the deliverable category.

As a reminder, next Monday the 28th is an expiration for November options on the Comex.  November is not a particularly big month for the gold and silver futures.

The mining stocks were hit today along with a general pullback in equities.  That often concerns those who watch them because it can signal a bear raid in the metals, with wiseguys positioning in related markets ahead of the hit.  But let's see what happens.

There seems to be a seasonal manipulation in gold and silver during December, most likely tied into year end shenanigans perhaps.   You can read prior articles about this here.

If they do that sort of thing again this year, I think they might be setting themselves up for a difficult first quarter with regard to available physical supply for delivery. It seems that the wiseguys will hit the wall again, taking it just a bit too far in short term greed, but one can always hope that wiser heads might prevail. If they do something and it doesn't break, the immature tend to double down and do it again. And again. And then it ends, badly.

Despite the antics, the structure of the physical gold bullion holdings in the US markets looks a bit stretched on the downside.  I am growing ever more persuaded that higher prices will be required to bring more metal to meet market delivery demands.   But since there has been a massive drawdown in the ETFs in the face of unrelenting demand for physical gold out of Asia, it could be a good trick. 

Better that they start earlier rather than later.  An exchange failure is not a desirable event.  And if a major scandal hits the Fed, it could not come at a worse time for them since they will be facing a massive confidence game next year with regard to tapering. 

Gold is flowing from West to East. This is something that obtain very little recognition in the mainstream media, and certainly not on from the financial media spokesmodels who appear as though they would be quite comfortable serving as the jaded but carefree hosts and hostesses for The Hunger Games.

As for me, I am ready for a perfect Manhattan, up with a twist. It's been a rather long week already. As Chekhov once said, "Any fool can face a crisis; it's the day to day living that wears you out."

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Magic Mountain

"There are so many different kinds of stupidity, and cleverness is one of the worst."

Thomas Mann, The Magic Mountain


"All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."

Adam Smith

Stocks pulled back a little today, in the face of weak economic news. Import and export prices came in a little on the high side.

Corporate earnings in the virtual realms remain rather good. The real economy story, not so much.

Stocks have gone almost parabolic, and deserve some time to rest. If we see a trend break it may turn bearish, but for now equities are rising on the Fed's balance sheet, light volumes, and lack of an event that might trigger selling.

If some event does hit, stocks will have the resiliencies of meringue. But that is a big 'if.'

Gold Daily and Silver Weekly Charts - Pop Go the Weasels

The metals popped higher today as the Non-Farm Payrolls came in light, and visions of QE taper receded further into next year.

There was intraday commentary Tremors and Warnings in the Gold Market that is worth reading. While I was glad to see the wiseguys lighten up on the price capping in the metals, there appears to be a more dangerous set of market conditions that they might realize.    Some of the 'old hands' see it, but the fresh crop of the masters of the universe seem to be quite taken with their powers over paper. 

It is a quaint notion, but the cure for tightness in supply is higher price. But given enough bad behaviour, and the normal market clearing mechanisms can fail to respond in the expected time intervals.

Nature, ain't it a bitch.

Who can say what snowflake will provide the little push that starts the avalanche. Better to see the avalanche conditions developing and do something to relieve them.

Have a pleasant evening.

Fly the Skies of Air Morgan: Never fear, the London Whale is here...