news.goldseek.com / By Keith Weiner / 21 November 2016
“The problem with central banks is that they increase the quantity of money in the same way that the problem with piping sewage into a swimming pool increases the quantity of water.”
It’s not really about the quantity, is it? It’s about the quality.
We believe that millions of people can see that the quality of the dollar and its derivatives—such as the euro, pound, etc.—have falling quality. Most of them are not (today) betting that therefore an ounce of gold will buy more of them. They are in stocks or real estate, which “should keep up with inflation” they think. We wonder if their child was in the pool, if they would think that an inflatable duck would keep up with the effluent…
However, sufficient numbers of people are speculating in gold and silver. This is what adds energy to these markets, and it’s energy that causes the price to move in both directions. There is little agreement (in the broader sense) about whether gold is going up or going down in the intermediate term.
There was some agreement that the Trump election would cause the former. That was when the dollar was a lot weaker than it is today. Before the election, the greenback was worth about 24mg of gold or 1.7g of silver. As of Friday, it rose to 25.7mg gold and 1.9g silver.
We suggest that you think of the dollar’s value in gold, rather than gold’s value in dollars. You know that the dollar has unstable value, which is generally falling for many reasons including that the Fed has a deliberate policy of debasement. We believe the dollar is not suitable for measuring value especially over longer periods of time, and manifestly not suited to putting a value on gold. Price is not the same concept as value.
Now it appears president-elect Trump is talking about a trillion-dollar stimulus program. Will this finally cause a breakdown in the dollar? Will it cause a breakdown in the Treasury bond market?
These, by the way, are separate questions. The dollar could be sold, if savers prefer pounds or euros or yen or yuan or some other dirty shirt that happens to be derived from the dollar. We see the usual suspects claiming that the dollar will collapse soon, or even that its collapse is imminent. From their writings, you would not know that the dollar is in an uptrend. A strong uptrend. An uptrend that goes back to 2011 or arguably 2008.
You would not know, from reading this stuff, that the dollar is higher in terms of the other paper currencies than it has been since 2003. It’s at a 13-year high. So far.
The dollar could be sold, in preference to gold too. However, that is not really happening in a big way right now, obviously.