Most people think the US Dollar is the worlds currency- and for the most part it is!
The dollar is the reserve currency that everything else is based on.
So why buy Gold? Why are some investors also running to crypto currencies as well?
The dollar has lost approximately 90% of its value over the past 50 years. In 1971 the dollar was completely decoupled from gold. From 1933 until 1974 gold was illegal to own in the US. However, foreigners could still exchange their dollars for gold until 1971. This held things in check. Once the dollar was free from the restraints of being backed by gold the dollar inflation began.
The dollar is nothing, but a fiat currency backed by nothing but faith. (and the world is quickly losing faith in the USA). Fiat money is paper money that is not convertible to anything of value. It is made legal tender by government decree. For example, an old Silver Certificate used to be convertible to one Silver Dollar. It was basically a receipt for a Silver dollar that was stored by the government. Today’s dollars are “fiat”, not backed by anything but air.
That is why my last car cost more than the first house I bought in 1983 for $55,000. Interestingly, the house would have cost about the same amount as 149 ounces of gold. That would buy a $282,000 house today.
Currency devalues when the money supply expands. The more dollars in circulation the less each one is worth when backed by nothing. The more they print the more dollar inflation there is. Inflation makes each dollar worth less-thus higher prices.
The dollar has recently reached a 2 ½ year low.
There is no indication the government will stop spending money. If anything, they will likely continue to increase spending. COVID is a main driver for spending and easy for the politicians to justify. Expect more spending on that front through 2021. I expect there to be new spending on “green” initiatives. Biden has already said he will be spending $2 trillion on climate change and you can bet that is just the beginning. You can count on a lot more programs to spend money on from free college to health care to a whole laundry list of wish lists.
At the Fed we are going to have Janet Yellen, the new Secretary of the Treasury, working with Jerome Powell the Chair of the Federal Reserve. Both are very pro stimulus and I think we will see interest rates remain extremely low for years.
While short term spending will revive the economy there seems to be no plan to pay the debt.
Unbelievably, 20% of ALL dollars ever printed were made THIS year, 2020! Incredible, I agree.
That is 20% inflation in dollar terms not the 2% the Fed is reporting.
The Fed intends to remain accommodative for at least the next two years and our politician just can’t pry themselves away from the checkbook. They want to revive the economy and supposedly take care of the Americans who have suffered enormously because the COVID-19 shutdowns. That includes bailing out cities and states who will not allow their economies to open.
Now a new COVID-19 strain has surfaced, and everyone is acting as if this is a big surprise. Viruses mutate. Its just what they do. This is just another reason for politicians to show their power and control us even more. Of course, they get their paychecks whether they work or not. To be equitable and be able to pat themselves on the back, there will doubtlessly be even more “relief” to help Americans out.
I used to think the politicians were crazy when they would spend billions of dollars like it was pocket money. Now they spend TRILLIONS as if its nothing to worry about. And if you think its for the good of us struggling Americans- think again.
Americans are getting a measly $600 stimulus check. If you add that up that is not even 20% of what is being spent in this latest package.
But here is some of the other expenditures we are paying for under the guise of helping our out of work citizens.
Burma to receive $135 million
Cambodia gets $85.5 million
$1.4 BILLION for “Asia Reassurance Initiative Act”
$130 million to Nepal
$500 million for Israel
$435 million for aid to the Ukraine
$3 million for Hong Kong rioters “Democracy Fund”
$10 million for gender programs in Pakistan
$2 Billion for Air Force missile procurement
$4 billion for Navy weapons
$2 billion for Space Force
Plus, a section regulating Horse racing and how the Dalai Lama is chosen.
