Gold and the US Monetary Base Signals the Greatest Depression

Tuesday, March 1, 2016
By Paul Martin

By: Hubert Moolman
GoldSeek.com
Tuesday, 1 March 2016

Gold is currently trading in excess of $1200 an ounce. This is well above the 1980 all-time high. However, this is an incomplete representation of what gold is trading at relative to US dollars. When you look at the gold price relative to US currency in existence, then it is at its lowest value it has ever been. This is an example of how paper assets are completely out of tune with tangible (real assets).

The US monetary base basically reflects the amount of US currency issued. Originally, the monetary base is supposed to be backed by gold available at the Treasury or Federal reserve to redeem the said currency issued by the Federal Reserve. The Federal Reserve does not promise to pay the bearer of US currency gold anymore; however, it does not mean that gold (it’s price and quantity held), relative to the monetary base has become irrelevant.

When the US monetary base gets too big relative to the gold price (& US gold reserves), then market forces seek to correct the situation. This has happened a number of times over the last 100 years, but on two occasions, it was so critical, that the situation actually overcorrected. This was during the 30s and the 70s.

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