Monday, April 16, 2007

A Long View of US Dollar Prices

(click chart to increase size)

(chart thanks to The American Institute for Economic Research )

For a hundred years or so, the US had relatively stable prices because it never had a central bank for long. "The sharp upturns in prices preceding the three peaks shown in the chart coincide with the War of 1812, the War of Separation, and World War I." Then, in 1913, (locate 1913 on the chart) a new central bank was established, "the Fed", which is still in existance, and prices took off with a vengence. It is quite the story, since it is illegal, which is what the book 'The Creature from Jekyll Island' by Edward Griffin is all about. Prices were even enough that there were no bond markets as we know them today. If the purchasing power of money (mostly gold and silver), or currencies (mostly that which is redeemable in gold and silver) do not fluctuate much, interest rates will not fluctuate much. If interest rates do not fluctuate much, the price of bonds will not fluctuate much. If the price of bonds do not flucutate much, there is no reason for traders to be interested in trading bonds, thus no huge active bond markets as we know them today.

People could actually rationally financially plan for their futures. Businesses did this, too. It actually paid to save. Back then you could actually get ahead by working.

And, there were no bull markets in the gold price like what is going on right now.

Oh, by the way. The gold prices and silver prices are still holding quite nicely above their newer, more upwardly sloping, primary trendlines.

The gold price bull market is now about 6 years old and the English speaking world is still comatose, do not pay any attention to it. Go figure that one. I guess they don't see the hyper-inflation freight train barreling down on them.

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