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Source link: http://archive.mises.org/7408/gold-and-the-dollar/

Gold and the Dollar

November 7, 2007 by


{ 27 comments }

Robert M. November 7, 2007 at 11:42 am

Nothing quite like seeing an (nearly) expontial decay in your real income. If people had brains they’d see this and call for change, but instead they wonder how long Britney will stay clean. Society is revolting.

DickF November 7, 2007 at 11:43 am

Jeffery,

Are your dates correct?

jeffrey November 7, 2007 at 11:46 am

Nov-01 means November 1.

darjen November 7, 2007 at 12:22 pm

definitely wish I was able to buy more gold earlier this year…

Curt Howland November 7, 2007 at 12:55 pm

Looks to me like Bernanke is doing exactly what he said he would do.

It may be only the Austrians who won’t be acting surprised.

flix November 7, 2007 at 2:01 pm
Helicopter Scramble November 7, 2007 at 2:39 pm

The other Fed heads were just political hacks. This one believes that loosening interest rates in the face of rising inflation is the thing to do. Boy are we screwed.

Person November 7, 2007 at 3:03 pm

I am completely perplexed as to why the dollar is falling in value.

Oh, sorry, I thought I was Mike_Sproul for a second there.

eric lansing November 7, 2007 at 3:31 pm

i like sproul… keeps us on our toes.

Fundamentalist November 7, 2007 at 4:23 pm

Looks like this may be a wild ride! At least Bernanke keeps things interesting.

Foo November 7, 2007 at 5:53 pm

Why don’t you try this with axes that include zero, to avoid exaggerating the change?

Are you trying to be honest, or just scaremongering?

Nathan Mayer November 7, 2007 at 6:48 pm

Foo? That’s the worst name I’ve ever heard!

I’m bullish on the dollar and bearish on gold, but I’m as doomish as they come.

N. Joseph Potts November 7, 2007 at 7:00 pm

Foo, I think you’re missing the point. This isn’t Al Gore showing you how the change lately has been so much more than the rate of change before – you’re supposed to COMPARE the two graphs, both of which are scaled so as to show the full change at full scale over the period in question.

When the upper graph goes down, the lower graph goes up. Just compare them and don’t worry about changes in the rate of change or where zero is – it was over 2,000 years ago, anyway.

jeffrey November 7, 2007 at 7:47 pm

Hey, Foo, I didn’t make these graphs. They are conventional price charts that everyone on the planet follows hour by hour.

kelvin parke November 7, 2007 at 9:03 pm

foo is exactly right. Omitting zero makes this a classic gee-whiz graph used not for explication but for obfuscation. Textbook violation.

jeffrey November 7, 2007 at 9:12 pm

Guys! these are not newly created. They have been running on Mises.org for many years in just this way

http://mises.org/markets.aspx

Anthony November 7, 2007 at 9:15 pm

It would help if people listened…

Jim Fedako November 7, 2007 at 9:37 pm

Foo and Kelvin,

If things continue per trend, it appears that your all-important zero might just make the graph in a year or two.

This is amazing and scary stuff. I’ll never understand why the Gore graph makes headlines and these are laughed away.

Come to think of it, we may just end up in a Goreian world in the near future — a world where the only carbon is from little fires buring outside of cold, damp caves.

Nat November 8, 2007 at 8:53 am

I do have one question about the dollar.

It is obvious why the dollar is dropping compared to gold or the Canadian dollar. But why the huge drop against the euro? Isn’t Europe just as screwed up as we are, if not moreso?

DickF November 8, 2007 at 10:37 am

Nat,

No, the euro is being managed better than the dollar. Take a look at each relative to the POG.

Be careful what you deduce from these graphs. They do not forecast what the FED will do in the future. If you jump on gold expecting it to continue up you could find your tail feathers burned.

Bernanke has found himself between a rock and a hard place. Greenspan took rates too low and caused the housing problem then raised rates and sent housing into the tank along with a lot more of the economy. Bernanke held rates too high for too long. If he keeps rates high he will induce a recession but if he lowers them he could induce inflation.

Bernanke’s best bet right now is to go slow. The economy is not in the tank yet. He needs to allow things to settle a little and hold interest rates right where they are. A lot of malinvestment has been wrung out of the system. But what makes it harder is that he apparently doesn’t understand why things are happening as they are.

The old Chinese curse, “May you live in interesting times.” Well, we are in interesting times.

Robert M. November 8, 2007 at 11:55 am

So we need to get this out to the public. The only thing that the public responds to is fear and celebrities. Therefore we need to find a celebrity with a brain and get them to start talking about these things in the media. People of terrified of China, so if we let them know that China could sink us at any moment, then they might respond.

The problem remains, what is there to be done? Seems to me like we’re in a little too deep to get out now without causing lots of problems. Any suggestions?

Nelson November 8, 2007 at 1:20 pm

So we need to get this out to the public.

Why? What I really want to know is how many people here, who belived the dollar was going to decline, actually did anything about it? Who here actually converted most of their dollar assets into gold *before* the spike in prices? It’s all good to assert this, that and the other thing. But to show your true beliefs you actually have to act on them.

DPW November 10, 2007 at 12:00 am

I read The Dollar Crisis by Richard Duncan and The Coming Collapse of the Dollar by James Turk and John Rubino in ’05. In May of ’06 I sold my Southern California bubble house purchased in ’98 and put 80% of the equity in gold, silver and mining stocks. Gold will easily go to four figures. Jim Sinclair has been saying $1650 for years. http://www.jsmineset.com/

leyva November 10, 2007 at 2:02 am

Gold will easily go to four figures.

How did you invest in gold?
Is physical gold the way to go? And is the best way to buy gold coins? gold bullion? gold stocks?

If the dollar will become worthless then gold stocks will eventually be worthless too, I am assuming.

How does someone buy $100 worth of gold at a time?

DPW November 10, 2007 at 7:37 pm

Physical is the way to go. I recommend either of these two people for purchasing bullion. I don’t go for the numismatics personally.

http://www.lewrockwell.com/blumert/burt-gold-archive5.html

http://the-moneychanger.com/entry.phtml

Peter November 10, 2007 at 9:01 pm

A good mix of physical coins/bars, “electronic” (goldmoney.com, bullionvault.com, pecunix.com), and mining stocks. Say 10%/10%/80%. Avoid gold ETFs.

Gold Coins June 25, 2009 at 12:30 am

Been looking that graph, and oh my, it is like a roller coaster. Still don’t understand the changes of the value in the market, please update.

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