-- Posted Sunday, 3 June 2007 | Digg This Article
"In that direction," the Cat said, waving its right paw round, "lives a Hatter: and in that direction," waving the other paw, "lives a March Hare. Visit either you like: they're both mad." "But I don't want to go among mad people," Alice remarked. "Oh, you can't help that," said the Cat: "we're all mad here. I'm mad. You're mad." "How do you know I'm mad?" said Alice. "You must be, said the Cat, "or you wouldn't have come here."
Now that we're back on the bull track, several have asked what I've been asking myself - "How high is up?" Answer: We don't know. Even in timeframe terms we don't know. Especially in time how long we'll rally in gold, we don't know. There have been an abundance of commodity cycle runs which seem to cluster around the 17-25 year timeframes. Even when they begin is debated. It only makes a difference if you don't recognize the end of it when it's upon you.
What puts the spin of confusion on us is that our minds are conditioned to compute values in fiat dollar definitions. This is an understandable response from a people who have selected an elastic yardstick, the US dollar, to plan their lives. Yes, their lives. They base their careers, their college fundings for their children, their home purchases, their retirements, and even their financial legacies for their beneficiaries all on this floating yardstick.
We went to a wonderful wedding this afternoon. A gentleman attending from Michigan, probably either in his late fifties or early sixties whom I'd never met before in my life introduced himself to me. And, after exchanging pleasantries unloaded with this comment: "I hope God looks out for them (the marrying couple) because this country's going to have a revolution!" What! "Oh, yes, our government has grown so big that it's threatening everybody." To which I responded "I suppose you're loading up on gold, too, no?" This rank-n-file GM UAW retiree then gave me a quick lesson on FDR's gold confiscation scheme, confiscating the 'people's gold' at $20/oz. and selling it to foreigners for $35. How refreshing to hear this from a complete stranger, but now a friend. There's hope for our country, yet, my friend. Good honest people are out there and are figuring out that their own government is their foremost enemy.
But, here's the thing: while many of us are at the end of our earning years, the generation following us is still earning those paper dollars. Their family-building and earning years are not static. Life is fluid for them. They're getting promoted, changing careers with greater salaries. Their savings are growing. Their stock portfolios are going up. And, these don't have to be people going into debt either. Many do, of course, but the next generation is not all composed of debtors. They feel good. They're successful. They get the warnings from the older folks, smile politely, and move on. Who can blame them when the same fluctuating yardstick is used by everyone else?
Gosh, I wish this Michigander didn't have to go home right away. He was 38 years with GM and the UAW. He knows the union leadership sold out its members. There's nothing like hearing the truth than when it comes from someone who has the real life experiences. An honest American who's come to the realization that he's been cheated by those he trusted.
But let's move on. Back to that moving yardstick. When you've got all you'll ever accumulate in life before you, most will take a closer look at that yardstick. If you had an outdoor thermometer that had 72 degrees permanently etched on it, would you still go outside in a January Minnesota winter with but a T-shirt? Most likely you'd get a new thermometer very quickly. But, until you begin comparing that paper dollar yardstick with real values "outside" you'll always think the temperature to be 72 degrees.
So far, for more than a century our government has been able to snap back that yardstick to balance with the real values as shown with the "outdoor prices." These "snap-back" adjustments are rare, very rare, and occur when too many people are ready to throw out that dollar yardstick. Ordinarily, it would just be the 'yardstick' of the country whose yardstick (thermometer) was broken. But, now, with the whole world using the dollar as their yardstick the dollar jettisoning is rapidly becoming a likely worldwide event. Not because retired people around the world are examining their savings, but because the "outdoor temperatures" are fluctuating in degrees ever more violently from what their 72 degree thermometer yardstick is showing. Oil? Insurance? Food? Fines? Home prices? Taxes? Even the recent postage increase to 41 cents can cause ire. Heck, I was just getting accustomed to 37 cents.
Let's check some of those "outdoor temperatures" with our fixed 72 degree dollar yardstick.
I think investors around the world began throwing out their dollar thermometers in 2000. Now, here's the thing: when people have rejected and thrown out those fixed thermometers that told us everything's A-OK, masters of the universe have tended to replace those broken measurements of deception and given us a "new" one often under a different name. But, always just another method to fool us again. And, we will be fooled. We'll stick our heads outside for awhile and find, yep, the temp actually is 72 degrees! And the trust in government fiat will start anew. But, for right now an ever growing number of people are looking outside and seeing the real temperature is something different than what they're being told.
People began to realize that the dollar yardstick was broken in 2000. For sure, it's been broken long before that, but since then others have taken notice and decided that there were real values out there that better reflected true values relative to what the yardstick was telling them. Right now it takes 20.4 ounces to "buy" the Dow Jones Industrial Avg.
You can select your own timeframes from the chart as to how long this gold run will go on, whether 15, 18, or 20 years, your choice. In any event, the Ratio will go to between 1 and 5 ounces of gold to "buy" the entire DJI. Just as people scoff at us now for owning gold, so too will they scold us for buying stocks nobody wants. It may not be with "dollars" as we know them now. Even Ameros may be the "new" yardstick, and people will look outside for awhile and exclaim "Yep, looks good, besides it's 'backed' by the Government. At that turning point most people will be poorer and long since sworn off of ever trusting the stock market again. A 1-for-1 gold-to-DJI Ratio will mean that an ounce of gold will equal the DJI! Follow the Ratio - not the fiat yardstick!
And finally, prices. We want to know because we still use that dang ole broken dollar thermometer, don't we? Well then if you trust the government's yardstick you must also trust their reported numbers. So, we'll use their own Consumer Price Index numbers (CPI). In the first week of October 1979 gold traded at $385. Using
Tom's Inflation Calculator we get an inflation-adjusted price of $1,191 today. And, mind you, I'm not taking it from the parabolic spike of $850 of January 1980 which would be a broken yardstick price of $2,362 today. An $8 silver price in 1979 would be $24.74. The February 1980 $50 spike adjusted price would be $138.95 in today's money.
So, it's relative values that count, not yardsticks with rigged thermometers. The Gold/Silver Ratio should end up somewhere below 20. Maybe 14 again. But, when it gets there you may want to give the "new" thermometer money consideration. The G/S Ratio today is 48. Unless those real value relative ratios get to those historic extremes, you don't want to give any new paper money a second look!
When you see the real price inflation take hold in supermarket food prices and energy (hey, you can handle $4 gas can't you?), that's when silver will really be chased. I can recall joking in the 1970s that a gallon of gas would be a silver dime. In high school I had a '50 Ford flathead and I think the going price (excluding price wars) was 15 cents a gallon. I could fill 'er up for around $2. Silver had been $1.29 forever. You do the math and see how far the silver price must go today to equal $3/gallon gas. In 1968 getting out of the Coast Guard, I took a job paying $90 a week. That was a little more than 2 1/2 ozs. gold equivalent. How many veterans coming home from Iraq today do you know that can get an entry job at $1, 600 a week (2.5 X $670) - to start? See what I mean? Americans are being cheated, and yet they kiss the hand that cheats them, pleading with them to keep on cheating them even more.
Americans - and they're not alone - have totally confused patriotism for their country with obedience to their government.
-- Charleston Voice
-- Posted Sunday, 3 June 2007 | Digg This Article
