Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
A Global Eurodollar Shortage - 27th Feb 17
Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - 27th Feb 17
Stock Market Breakout or Breakdown? - 27th Feb 17
Peak American Wealth – Revisited - 27th Feb 17
Oscars Debacle – Movies More Costly As US Dollar Devalued - 27th Feb 17
Stock Market Short-Term Uncertainty As Stocks Fluctuate Along New Record High - 27th Feb 17
Dow vs Precious Metals : Where’s The Beef ? Where’s the Bull ? - 27th Feb 17
Stock Market Sentiment at ‘Extreme Greed’ - 26th Feb 17
Trump Relinquishes Control of Foreign Policy - 26th Feb 17
[Gratis] "Dark Money" Secrets Revealed! - 26th Feb 17
Stock Market SPX New All-time Highs Continue - 25th Feb 17
POWERFUL GOLD & SILVER COILED SPRINGS: Important Charts You Have To See - 25th Feb 17
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Silver, Gold, the Argentina Peso, and Exponentially Increasing Prices

Commodities / Gold and Silver 2016 Feb 15, 2016 - 02:39 PM GMT

By: DeviantInvestor

Commodities

The exchange rate between the Argentina Peso and the US dollar in January 1945 was 4.17 pesos to one dollar.  Like the United States, Argentina created substantial price inflation – devaluation of their currency – in the 1950s – 1990s.

According to Wikipedia Argentina devalued their currency by a factor of 100 in 1970, by another 10,000 in 1983, by another 1,000 in 1985, and by another 10,000 in 1992.


From Alan Greenspan in 1966: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”

In summary the 1945 peso was devalued by 10 trillion to one between 1945 and 2015.  Imagine what that did to the poor and to the saving of anyone who left that savings or retirement in pesos!

The compounded average rate of increase in the number of pesos per dollar from 1945 to 2015 was about 55% per year, every year.  The devaluation was worse than average between 1975 and 1995.  Gold in 1945 pesos increased at a compounded average rate of 63% per year since 1945.  (Store of value!)

Suppose your savings in Argentina pesos had been valued in gold.  Take the peso to dollar exchange rate and multiply by the price of gold in dollars and we see the price of gold in 1945 pesos.

THE POINT OF THIS IS:

Argentina devalued their currency from 1950 onward and more aggressively in the 1970s, 1980s and 1990s.  The difference between Argentina and the United States (and Japan, the EU, the UK, Australia etc.) is mostly a matter of degree.

The US benefitted from the dollar’s “reserve currency” status plus the US military, but the devaluation process has been similar, though less devastating.  In 1971 the US dollar bought approximately 0.03 ounces of gold.  By 2015 the US dollar bought less than 0.001 ounces of gold – a devaluation of over 30 to one.  More devaluation is coming.

EXPONENTIAL INCREASES HAPPEN HERE:

The global financial system is based on exponentially increasing debt, currency in circulation, and devaluations.  Examples:

  • Official US national debt: Approximately 9% per year exponential increase since 1913. (Consumer price inflation is alive and well.)
  • Gold price increase in US dollars since 1971: Approximately 7.8% per year exponential increase since 1971.  (Increases coming soon.)
  • Silver price increase in US dollars since 1971: Approximately 5.5% per year exponential increase since 1971.  (Big increases coming soon.)
  • Shanghai Index from June 2005 to October 2007: Approximately 217% per year exponential increase for 2.3 years.
  • Shanghai Index from March 2014 to June 2015: Approximately 216% per year exponential increase for 1.3 years.
  • Crude Oil price increase from December 1998 to October 2000: Approximately 196% per year exponential increase for 1.8 years.
  • Crude Oil price increase from January 2007 to July 2008: Approximately 203% per year exponential increase for 1.5 years.
  • NASDAQ Composite price increase from October 1998 to March 2000: Approximately 257% per year exponential increase for 1.4 years.
  • Nikkei Index price increase from July 1984 to December of 1989: Approximately 129% per year exponential increase for 5.4 years.
  • Silver price increase from August 1977 to January of 1980: Approximately 276% per year exponential increase for 2.4 years.
  • Adjusted US monetary base per Federal Reserve Bank of St. Louis increase from 2008 to January of 2015: Approximately 24% per year exponential increase for 6.5 years.
  • Exponential increases have also occurred in student loans, sub-prime auto loans, military expenditures, SNAP program (food stamps) expenses, media expenses to help purchase US Presidential elections, donations (pay-offs) from Wall Street to Presidential candidates, and many more.

CONCLUSIONS:

The Argentina peso was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.”

The US dollar was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.”  The rate of devaluation was substantially less in the US, but the basic concept and result were the same – higher prices.

Since the US dollar is backed by “full faith and credit” and not by gold, oil, diamonds, or anything real, exponential increases (since 1971) in public and private debt, expenses, loans, currency in circulation, and prices for most items have been typical.

Exponential increases are occasionally not managed or controlled and increases of 25% to 250% per year occur, as per the above examples.

Such parabolic spikes usually correct in a nasty crash and people invested in those spiking “assets” typically lose money, whether it is the NASDAQ, Nikkei, gold, crude oil, or many others.  Imagine the impact from a crash in the US dollar – it might happen.  (Some suggest it is inevitable.)

Pesos, dollars, yen, euros, pounds, and other fiat currencies will continue to be devalued since we live in a devaluing world.  Backing the US dollar with the military will help, support from petro-dollars will help, “reserve currency” status will help, but the trend is the same – fiat currencies always devalue and gold, on average, holds value.  Examine again the chart of gold prices in Argentina pesos for an extreme example.

Do your own research, but in my opinion, gold and silver bottomed in 2015, the S&P 500 Index topped in 2015, and the next several years will see much higher gold and silver prices, and considerable trauma for stock prices.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2016 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2016 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

Catching a Falling Financial Knife