Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Impact of US Dollar Inflation and Devaluation - ILLUSION, MYTH AND MAGIC

Currencies / US Dollar Jan 10, 2008 - 06:02 AM GMT

By: Mark_B_Rasmussen

Currencies

Best Financial Markets Analysis ArticleTHE DOLLAR HAS LOST OVER 97% OF ITS PURCHASING POWER SINCE 1913 (THE FOUNDING OF THE FEDERAL RESERVE 94 YRS. AGO).

What does it look like when we convert U.S. benchmarks of value to other THINGS over the past 8 years?


DOLLAR EURO OIL NAT GAS URANIUM GOLD SILVER
12/99 1 0.84 25 6.5 9 290 5.19
12/06 1 1.32 61 6.3 72 635 12.88
12/07 1 1.46 97 7.2 90 833 14.77
8 YR INCREASE 0.62 72 3.7 81 81 543 9.58
% DOLLAR LOSS 42% 74% 50% 50% 90% 65% 65%

 

I see a trend here, do you?

U.S. RECORD EQUITY INDEX PRICES 2000

DOW 1/2000 11722
S & P 24/03/2000 1553
NASDAQ 10/03/2000 5048

 

Following are the U.S. equity indexes converted to other measures of value from 12-1999 to 12-31-2007.

CLOSING 12/31/07 DOLLAR EURO OIL NAT GAS URANIUM GOLD SILVER
DOW 13265 7694 3449 6633 1327 4643 4643
S & P 1468 851 382 1078 147 514 514
NASDAQ 2652 1538 690 1326 265 928 928

 

So much for nominal record highs in real terms. If this is a bull market for equities, what would a bear market look like?

This is the hidden part of the “WEALTH AFFECT” equation. You get more dollars and feel ever poorer.

The headline nominal numbers look great except when compared to other measures of value (real purchasing power). Of course we could use barley, wheat, soy beans, rice, milk, eggs, butter, beef, gasoline, college tuition, health care/insurance etc., etc., etc.

The next part of this missive is interactive.

VALUE OF YOUR REAL ESTATE IN REAL TERMS: 

PRESENT VALUE OF YOUR REAL ESTATE _____________ REAL VALUE 2000

EURO X .58 = ___________­­­__

OIL X .26 = _____________

NAT GAS X .50 = _____________­

URANIUM X .10 = _____________­

GOLD X .35 = _____________

SILVER X .35 = ____________

Some little acknowledged elements of the “WEALTH AFFECT are:

•  One must go into debt to enjoy the “WEALTH AFFECT” and decimate his balance sheet with mortgage debt. This was good for lenders for awhile. It appears lender's unmitigated greed, recklessness and deceit is being duly rewarded.

•  The “WEALTH AFFECT” completely disregards the need for consistent and sustainable income to service the growing debt.

•  This usually results in greater debt service as a % of income for a very long time. This is wealth transfer by claims against future income…..a debt slave or sharecropper as Warren Buffet calls it. If the loan is adjustable it can be an incrementally increasing % of income over time.

•  Origination costs of the debt is further wealth transfer from borrower to lender.

•  The debt declines very slowly regardless of whether the asset declines in value, owing more than the value of the asset. The new legislation to “protect borrowers” from loss of their homes is designed so that homeowners can continue to pay considerably more than their home is worth and the lender does not have to foreclose and have another huge and well deserved write down/loss. “I'm from the Gov'mint and I'm here to help you”.

•  Insurance premiums increase because of the increased cost of replacement due to inflating costs.

•  AMT (Alternative Minimum Tax) is the confiscatory tax levied on short term profits.

•  The benefit, of the “WEALTH AFFECT”, is that the borrower can borrow a considerable amount against future earnings……today, bring those earnings into the present and pay for short lived prosperity/pleasure for decades into the future.

•  If/when the asset/real estate declines in value faster than the loan declines, we have the “POVERTY AFFECT”?

The net result of this illusion, is that most american's largest asset is declining in value and the dollars they are denominated/measured in, are declining in value also. How do you like the “WEALTH AFFECT“ now? Clearly the greatest fraud ever perpetrated against the American people.

One should not forget that Eduard Ponzi is the father of contemporary U.S. economics and that the 1922 Weimar Republic of Germany and current day Zimbabwe are the models of U.S. monetary policy and that of central banks around the globe.

“Inflate or die” is the battle cry/mantra of all central banks. They must increase/inflate fiat unmoney backed by nothing. The U.S. Dollar is an (IOU…… nothing) and the EURO is a (Who O'S U……..nothing)!

”By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

John Maynard Keynes……attributed to Vladimir Lenin.

NOW YOU ARE ONE IN A MILLION!

By Mark B. Rasmussen

Mark is a real estate appraiser/broker by profession

Copyright © 2008 Mark B. Rasmussen

Mark B Rasmussen Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules