James Turk, founder of GoldMoney.com published a commentary on gold breaking to new all time highs in many currencies around the world. In addition to looking at gold's new highs, he goes into detail about the ballooning debt problem America faces. He also provides evidence of "unlimited" dollar creation that I alluded to in my October 14th post "Bulls Get Caught in the Credit Crunch" when I stated: "With the Fed and other central banks around the world offering “unlimited dollars” to combat the credit crisis, it should be clear that inflationary pressures will continue to mount." I did not explain why i put "unlimited" in quotation marks at the time, but James Turk noticed the same language and explained it better than I could have in his most recent commentary.
“Gold’s New Records” By James Turk [October 18th, 2008]
Looking at the long term graph of the gold price in Canadian dollars, it is clear that gold has been in an uptrend since the year 2000. And the uptrend got steeper and much more volatile near the end of 2005, making a new all time high on Friday, October 10th, 2008. Gold looks like it is at an all time high by historical standards, since we are near the same nominal value as 1980. But when comparing the price of anything today, to the price of something a long time ago, the price needs to be adjusted for inflation. Even using the government inflation numbers (which systematically tend to under report inflation), the gold price today in inflation adjusted terms would have to be over $2000 to reach the old 1980 high. The economic and inflation problems that Canada and America face today are arguably far worse today than they were in the 1970's. It is very possible that gold will break to new all time inflation adjusted highs during this secular bull market and has the potential to never reach a top, if paper currencies continue to be debased.
Even as the gold price went up and down over the last few years priced in American and Canadian dollars, the price of gold in Zimbabwe dollars kept going up. And unless there is some policy reform in Zimbabwe, there is no top to the price of gold in Zimbabwe dollars. And with the United States and many other countries around the world adopting the same monetary policy as Zimbabwe, there is no top in sight for the gold market, priced in depreciating paper currency. The government and central bank will only stop inflating, when the public finally realizes that they will never stop inflating. And when people figure this out, the currency then becomes worthless, and a new currency will be born.
Hopefully the new currency will be gold or another market determined money, rather than a new digital fiat currency control by a world central bank, which has the same potential to be inflated and destroyed. If the world comes out of this crisis with one fiat currency and with one central bank, the people of the world will forever be enslaved and controlled by the elites who have the power to create new money. If we end up with a North American central bank, European Central Bank, and Asian Central Bank, the effect will be similar to have just one central bank, since all three banks will be controlled by the same people. With control over the money supply, central economic planning results, where the elites control the direction of society by implementing certain monetary and fiscal policies. Hopefully, the people of the world will realize that the crisis was caused by government intervention in the free market, and that capitalism is not to blame. In which case, the world would experience a freedom revolution, with sound money at its core, leading to a new age of property, freedom and technological growth that would propel society into a new golden age, overtime eliminating war, poverty and hardship around the world.
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