Consumer prices climb sky high! Producer prices rising even faster!
We can’t help but laugh. Maybe we shouldn’t laugh, but we do. Every time the financial press and the mainstream media tell us how “strong” the dollar is these days!
For real people in the real world, this is the weakest the dollar has ever been. Bought gasoline in the last couple of months? How about food? If so, you should know what we mean. Your dollars just don’t buy as much.
In fact, the US dollar has never bought less! It’s that weak!
Here are a couple of metrics. According to the government’s own numbers, consumer prices have risen 9.1 percent over the last year. The Producer Price Index, wholesale prices that are headed right your way, rose 11.3 percent over the last year.
Let’s be clear about what these number mean. They mean the US dollar buys 9.1 percent fewer consumer goods than it did a year ago. They mean that the US dollar buys 11.3 percent fewer wholesale goods than in did a year ago.
These numbers mean that dollars – which people hold and save for one reason only, for what they will buy – are falling fast.
The US dollar has never bought less! It’s that weak! Then maybe holding dollars, saving dollars, planning your retirement in dollars isn’t that great an idea, right?
It’s true that with the recent bloodletting in stocks, bonds, and cryptos, desperate Wall Street speculators have had to sell gold to keep from going under. Probably not much of it is what we think of as real gold. It’s mainly paper gold: title to gold that is presumably held intact somewhere but we’re not sure anybody knows, gold shares, ETFs, futures contracts. As David Stockman puts it, they are whistling past the inflationary graveyard. But they have to in order to keep afloat. Good! When they dump paper gold, it helps create a buying opportunity for us! In real physical gold that actually exist and not just on paper. You can take it with you?
So what’s with this strong dollar business that is all over the news? It simply means that the dollar’s exchange value is somewhat high when compared to other currencies that are also losing value!
The Dollar Index that is referred to in these reports consists of half a dozen foreign currencies. The Euro and the Japanese yen account for more than 70 percent of the index, and both the European Central Bank and the Bank of Japan have negative interest rates. But saying the dollar is strong is like saying that the Titanic floats better than the Lusitania as they both sink!
In the meantime, the sky is the limit for gold. These inflationary episodes often end with an angry public demanding an end to funny money and that real money – gold- backed money – be reestablished. One writer noted the other day that based on the current money supply numbers (using M0 which is a measurement of cash), simply providing a 20 percent gold backing to the dollar would require a gold price of $7,500 an ounce.
But for now, be aware that the value, the worthiness, the purchasing power of US dollar has been falling at a speed that hasn’t been seen in more than 40 years.
The dollar has never been weaker!