Saturday, February 24, 2007

US Dollar Indexes

Another element of gold and silver bull markets is the devaluation of government fiat tokens. The more there is of something, the less valuable it is. The more US dollars there are, the less valuable they are, the less they buy, the more of them someone would demand for the same amount/weight of gold or silver, barrel of oil, quart of milk, mega watt of electricity, cubic feet of gas, pound of butter, loaf of bread, year's worth of Internet access, windshield wipers, etc. Since 1971, the year that the US government went back on, reneged on, its promise to redeem US dollars in a weight of gold, this applies to all government fiat tokens which work just like the play "money" in the board game: Monopoly.

The more realistic way to watch how the world is valuing the US dollar (which should show up in the US dollar gold price or US dollar silver price) is to watch the broad dollar index rather than the US dollar index. The broad dollar index is saying that the world is valuing the US dollar less than many who go by the US dollar index believe.

US dollar index (click on graphic to enlarge)

Weightings of the US Dollar Index:
Japan/JPY = 13.3%
Europe/EUR = 16.3%
Canada/CAD = 17%
Mexico/MXN = 10.4%
UK/GPB = 4.3%
China/CNY = 8%
Hong Kong/HKD = 2.6%
Malaysia/MYR = 2.4%
Other = 25.8%

Broad dollar index (click on graphic to enlarge)

Weightings of the Broad Dollar Index:
Euro = 18.8%
Canada = 16.43%
China = 11.35%
Japan = 10.58%
Mexico = 10.04%
UK = 5.17%
Korea = 3.86%
Tiawan = 2.87%
Hong Kong = 2.33%
Malaysia = 2.24%
Singapore = 2.12%
Brazil = 1.79%
Switzerland = 1.44%
Thailand = 1.43%
Australia = 1.25%
Sweden = 1.16%
India = 1.14%
Philippines = 1.06%
Israel = 1.00%
Indonesia = .95%
Russia = .74%
Saudia Arabia = .61%
Chile = .49%
Argentina = .44%
Colombia = .41%
Venezuela = .30%

A long long term chart (since 1971) of the broad dollar index is saying that the long long term uptrend of the US dollar has been broken to the downside:

What is interesting is that the broad dollar index topped out at just about the same time that the gold and silver bull markets were putting in long term bottoms.

Gold and silver? "Get it while you can." - Janis Joplin

Commodity Indexes

Commodity indexes can be used to adjust the Dow to a more realistic level just like gold can be used, to see how much its purchasing power has really increased. They can also be used to see if the gold and silver bulls are still in place since commodity bulls are an element of gold and silver bulls. But, use the more realistic one, the CCI (Continuous Commodity Index) rather than the widely used and more unrealistic CRB (Reuters/Jefferies CRB Index).

The CCI is composed of 17 commodities equally weighted at 5.88% each.
Energy = 17.64%
Grains = 17.64%
Livestock = 11.76%
Softs = 29.4%
Metals = 23.54%

The CRB is composed of 19 commodities unequally weighted.
Energy = 39%
Grains = 13%
Livestock = 7%
Softs = 21%
Metals = 20%

Sooooooo, has the commodity boom (an important part of a gold and silver bull markets) ended like some are saying? Not if you are using a realistic commodity index.

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .” - Sir Josiah Stamp, who became a director of the Bank of England in 1928

The Dow Priced in Gold

(Click on chart to enlarge. The charts start at 1998.)

Reality is not always what most think it is. The Dow Jones Industrial Index has many prices: US dollars, Yen, gallons of gasoline, quarts of milk, gold, silver and more. Pricing the Dow (an index of 30 stocks) in gold is one of the ways to get a more realistic valuation of it, those poor souls who think that they are back into positive territory since 2000. They do not realize that the unit of measure/account aspect of the US dollar has changed since 2000, a lot, at about 8-10% per year. If the US dollar was a yard stick, then it's length has been shortened about 8-10% per year. Most people are still using the yard stick not realizing that it kept getting shorter every year since 2000.

Despite the Dow being up from its 2003 bottom to more than its 2000 high, the purchasing power of their investment in the Dow stocks is still way, way down from where it was at the Dow top in 2000. The NASDAQ and S&P 500 are in worse shape. This is what unrestrained creation of US dollars out of thin air can do. No wonder the US Federal Reserve Bank is illegal, unconstitutional.

This also shows the value of owning gold when government treasuries and their central banks get out of control.

Some "money" ("money" today is really just tokens) supply growth numbers over the last 12 months. This is really what inflation is which inevitably leads to higher prices here and there, and the theft of value stored in "money":
UK M4 +13%
Eurozone M3 +10.6%
China M2 +15.9%
South Korea M3 +10.6%
Australia M3 +13%
Russia M2 +48%
Reconstructed US M3 +11 to 11 1/2%
This is some serious theft of the stored value element of monies, currencies and tokens. Owning gold and silver is your defense from your government's treasury and central bank theft.

"The issue today is the same as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite." --Thomas Jefferson

“There is absolutely nothing to be said for government by a plutocracy, for government by men very powerful in certain lines and gifted with 'a money touch,' but with ideals which in their essence are merely those of so many glorified pawnbrokers.” --Theodore Roosevelt, 26th president of the US

Saturday, February 17, 2007

Adjusted Gold Price

The US Dollar is not worth anywhere near what it was back at the top of the last bull market in gold. The yellow line is the gold price adjusted for the depreciation of the dollar since the top of the last gold bull market.

Roughly speaking a 1980 US dollar buys only about 1/17 th of what it used to buy. So, gold needs to go up about 5 1/2 times before its price equals, in purchasing power terms, its old 1980 price at the top of the last bull market. $660 times 5.5 = $3,630. But between now and when gold gets to $3,630 there will be even more US Dollars in the world. So count on an even higher gold nominal price.

"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." - Ben Bernanke remarks before the National Economists Club, Washington, D.C. November 21, 2002

Friday, February 16, 2007

US Dollar Purchasing Power

This is the purchasing power of the US Dollar since the passage of the Mint Act in 1792.

(click on chart to enlarge)

The current US Fed (central bank) was started in 1913, ironically the same year the income tax was started. The US had 2 other central banks during the 1800s but only for short periods of time. No wonder the US Fed is illegal, unconstitutional. Look at what it did to the purchasing power of the US Dollar.

Sunday, February 11, 2007


A million unit Hungarian government fiat token.


A 500,000,000 million unit Yugoslavian government fiat token:

The US Continental became worthless. The US Green Back became worthless.
We will have to wait to see if the current US government/Fed fiat token becomes worthless, or if they change its nature and tie it to gold with some ratio before it becomes worthless. Either way, the US is on its third fiat token. Either way, the US Dollar ** as we now know it** is close to its end.

Now, here **was** a real currency, not a token like the US Dollar currently is, redemable in gold, the actual metal.

"Payable To The Bearer On Demand"

Friday, February 09, 2007

US Treasury Excess Receipts

The US Treasury has gone into competition with the Fed.

"The US Treasury loans "excess receipts" to the Primary Dealer Banks in an innovation that is separate from Fed Monetary Policy"

Graphic of excess receipts

Oh, by the way, some central banks are adding gold to their reserves according to updated IMF data:
Russia added 7.54 tonnes
Philippines added 1.4 tonnes
Kazakhstan added 7.38 tonnes
Greece added 3.56 tonnes

According to I-Net Bridge news South Africa's central bank in January increased its reserves to $ 4.68 million ounces from 3.99 from the previous month.

Central banks are slowly turning from selling gold to buying gold.

. . .

Other subject:

"The encouragement of mere consumption is no benefit to commerce because the difficulty lies in supplying the means, not in stimulating the desire for consumption; and production alone furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption." - Jean-Baptiste Say, A Treatise on Political Economy, 1803

Well, the US government, some of semi-private enterprise, and the US media has been doing one heck of a job stimulating consumption. One of the ways to monitor the current unwinding of over stimulated consumption is to check in with the Implode-O-Meter ( ) . . . "a saga of corruption, stupidity and government complicity".

Thursday, February 08, 2007

35 Year Chart of the USD Index

(click on chart to enlarge)

The US Dollar has now been displaced by the Euro according to the value of cash currency in circulation world wide. There is more Euro cash being used in the world than there is USD cash being used by the world.

And, the US Dollar has now been displace by the Euro for the currency of the majority of the world's bond markets (the denomination of the debt instruments). The total value of Euro denominated debt is larger than the total value of USD denominted debt.

The Euro has done this in only about 6 years.

That's to say nothing about oil in some countries starting to be denominated in Euros as well as being paid for in Euros, or taken in trade for other goods.

The US Dollar was down near the 80 level for the first time in 1978. It has been down there 4 more times since. The more the 80 level gets probed, the weaker this level becomes as support.