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Bullets, Beans


Tuesday, 7 February 2012

Gold and Silver vs. the Money Supply

In a GoldMoney commentary headlined “Gold and silver price shakeout,” Alasdair Macleod explains the above chart illustrating US dollar True Money Supply (cash, instant deposits and checking accounts plus a few other minor cash balances) expressed in official gold reserves held at the US Treasury: “The chart clearly shows that while gold has risen dramatically over the last decade in nominal dollar terms, adjusted for the extra money in the system it has only risen 150%….to where it was in late 1991, when the nominal price was $360. Gold’s valuation is therefore still at exceptionally low levels.

The sense of perspective charts like this imparts is vital for understanding the dangers from the tsunami of paper money and debt. Conventional portfolio managers have missed this point entirely, being hampered by the legacies of portfolio management theory and Keynesian economics. But there is a growing band of private individuals around the world who do get it and are accumulating physical gold and silver. They are beginning to understand that paper money is falling rather than gold and silver rising.”

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