You know from Your Survival Guy’s recent story about what I saw in Europe that the dollar is strong compared to other currencies. But what about when it’s compared to its former self?
From January 1934 until March 1968 (with some variation around WWII and the Korean War), gold was worth about $35/ounce, or more appropriately stated, a dollar was worth around 1/35th of an ounce of gold.
At the time, America was trying to pay for the ongoing war in Vietnam, and the increased spending on the war was pushing inflation higher. Adjusted CPI readings in 1966 and 1967 were 2.9%. That may seem low by Bidenflation-era standards, but at the time, it was significant. By 1968, CPI growth had reached 4.2%. The spiraling inflation was too much for the London Gold Pool, which was the international system managing the convertibility of currency to gold for the world’s wealthier nations. The Pool collapsed and that ultimately led to the end of American gold convertibility in 1971.
You can see on my chart below that today, gold trades for $2,317 per ounce in New York. Or, more appropriately, a dollar is worth 1/2317th of an ounce of gold. Because an ounce of gold today is the same as it was in 1934. It’s the same weight. It hasn’t rusted or tarnished. It’s not the gold that’s changed. It’s the dollar that’s rusty. See the problem?
Part of the cause is the massive increase in monetary reserves and overspending by governments at all levels. You can see on Your Survival Guy’s chart below how the increase in monetary reserves since the 1960s tracks the explosion in the price of gold.
Action Line: When you want to discuss inflation and the dollar’s weakness and what that means for your investment portfolio, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
Originally posted on Your Survival Guy.
