Saturday, December 13, 2014

U.S. Debt vs. Gold Price

I haven't posted a debt vs. gold chart in a long time and thought I'd dust off the data. A few observations:

- Gold is cheaper now (compared to US debt) than it was when Nixon decoupled the dollar from gold in 1971
- It is still slightly above the exponential trend, which appears to flatten around 0.5
- The 2011 bubble was nothing compared to 1980. Wowza!
- I haven't bought gold in a while, nor have I sold it
- still holding enough to catch the last plane to Guangzhou if the whole US goes Ferguson

Monday, December 8, 2014

For he's a jolly good fallow

source: St. Louis Fed

I updated my graph of M0 and M1 money stock to use hot colors (red and orange) since they are hot, hot, hot. The velocity of M1 and M2 use cool colors (blue and green) because they are cool and getting colder. We have lots of money and money potential, but no one wants to move it around. To bankers everywhere, I offer congratulations by singing "For he's a jolly good fallow".

Thursday, December 4, 2014

What if we priced truth in gold?

The FRED (Federal Reserve Economic Data) blog had a post this morning titled "What if we priced food in gold?".

There are several problems with the premise and conclusion, but what interests me more is what signal the Fed is trying to send with this post. Why does the Fed feel compelled to make a point about gold price fluctuations when gold has not been used as currency in the US for 81 years? Has the Fed been flooded with emails asking why we can't use gold to buy groceries? It seems out of the blue.

Let's look at the retail price of bread in New York, NY in dollars using FRED's data. I used all of the available data which runs from 1913 to 1943.

There were some big monthly swings in price. You must account for the supply and demand of bread along with the supply and demand of dollars with the active continuous intervention in the market in both the supply and price of dollars (something the Fed lists as a plus to price stability). For even more instability, let's check out the median price of a new home in US dollars from 1963 to present. This one looks like Mr. Toads Wild Ride!