Wednesday
When the dollar falls, it registers as the price of gold (POG) rising; when the dollar rises, then it registers as the POG falling.
Gold is the only real measure of value and it has been measuring the US$ as rising in value for a while now. Most of that rise (demand) is due to the necessity to service the massive world-wide debt, much of which is denominated in US$s. Some is the ‘flight to safety’ factor by those who remain blissfully unaware of the forces at play in the world.
I believe that this upward trend of the US$ will soon reverse. Up until fifteen months ago, most of the damage to Western economies was via the anti-jobs and anti-business sledgehammer of regulations. But the hysterical reaction to WuFlu saw the sledgehammer exchanged for a wrecking-ball. Governments forced the closure of businesses, then borrowed trillions to try to paper over the self-inflicted damage. Now they are going to have to balance their books. They won’t be able to, but they will destroy what remains of Western Civilization in the effort.
The emphasis will move from regulation to taxation. Everything and anything that cannot be hidden will be taxed. It will begin with easy to justify taxes such as ‘investment’ properties (greedy rich people causing house prices to rise beyond the reach of ordinary workers), then gradually broaden and deepen until nothing is left untouched.
This extraction of capital from the productive economy will further the economic damage already caused by regulations; destroying even more businesses and jobs.
Where can you hide your wealth? Gold has been the chosen vehicle for hiding wealth from governments for thousands of years. A serious rise in the number of dollars being sold for Gold will see the POG go through the roof. Note that this does not involve the collapse of the dollar (yet), just a more realistic assessment of its current value.
Eventually, some governments may again ban the holding of Gold, but that would only serve to bring dollars under even greater scrutiny, which would cause the $POG to rise even higher. Gold will not disappear, nor abdicate its role as the store of stable value over time. It will just require more dollars to compensate for the risk because the trade has become illegal.
For twenty-one years I have been watching for signs of a rise in public awareness of the parlous nature of fiat. The profligate nature of politicians has finally shoved and shovelled it into public consciousness. Australia’s national debt will pass ONE TRILLION dollars this year.
The next couple of years will see Gold at multiples of its current US$ price. Within the same time frame, I would expect the Gold/silver ratio to drop to somewhere in the 40 – 50 range with silver comfortably north of the US$100 mark.