Richard Russell: Demise of the "Yankee Dollar" vs. the Rise in Gold

Sadly, the great American public doesn’t understand what is happening…[and that it will be] on a greater scale than has ever occurred before in the history of mankind. It’s going to hit the current generation of Americans like a whirlwind. It will be historic in its intensity and destructiveness.  [Here is an attempt to enlighten them.] Words: 939

So says Richard Russell (http://ww1.dowtheoryletters.com/dtlol.nsf) in an article* which Lorimer Wilson, editor of www.munKNEE.com,  has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Russell goes on to say: 

The U.S. has been getting away with spending more than it takes in ever since World War II. It’s a process that isn’t sustainable, and if a process is unsustainable it will end. The U.S.’s habit of spending more than it’s paying for has finally hit a brick wall. The wall is the demise of the famous “Yankee dollar.” In order for the U.S. to live over its head, it must borrow. Half of the U.S.’s borrowing comes from foreign sources – and that’s a problem.

The U.S. Dollar Has No Fixed Value

The fiat US dollar has no fixed value. It’s worth must be measured against other currencies… Our foreign creditors, many of whom are loaded with dollars, keep a sharp eye on the comparative value of the dollar, and they’re now frightened and mulling over the credit-worthiness of the U.S.. The recent warning from the S&P rating agency[has] heightened our creditors worries about both the U.S. and the dollar. The disgraceful battle between Obama and the Democrats vs. Paul Ryan and the Republicans is further raising the fears of our creditors.

With commodity inflation now out in the open, Fed head Bernanke has a problem. His absurd defense is to refer to “core inflation” (without the cost of food and energy). Bernanke [claims] that there’s “no inflation,” and that should inflation develop that the Fed can end it any time they want.

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What Bernanke and the Fed can not control is the tell-tale price of gold…[Unfortunately for them, however,] gold is traded internationally across the face of the planet and 24 hours a day. Gold is out of the hands of the Fed and Goldman Sachs, and it trades everywhere and where it wants.

Money and Gold – Then and Now

This year I’ve been telling my subscribers to think in terms of two concepts:

1. Avoiding losses (rather than thinking in terms of building fat profits)
2. PURCHASING POWER. Are you gaining or losing purchasing power?

For ten years I’ve advised my subscribers to climb aboard the great bull market in gold…Gold is the only true standard of value. The value of everything else must be measured in terms of gold…

• It costs a lot more (in dollars) to buy a new Ford today than it did back in 1932 but how many ounces of gold does it cost to buy a new Ford today compared with the ounces required in 1932 to buy a new Ford? What has changed, gold or the dollar? Gold hasn’t changed, what has changed is the dollar, which has lost purchasing power.
• At the peak of the housing market in March 2007 the median US home price was $262,600, which was equivalent to 340.6 ounces of gold. Today’s median income price is $186,100 or 109.2 ounces of gold. So in terms of real money, gold, the US median home price has lost 47% since 2007.
• Applying the same measurements to the Dow, from the end of 2001 to the end of 2008 an investment in the Dow would have lost 81% of its purchasing power in terms of gold…

The U.S. public is rapidly being educated about money and gold. Ads are appearing almost daily in the newspapers and mass mailings are being sent out by advisories educating the public on the fact of the dying dollar and the Fed’s plan to solve the debt problem by diminishing the purchasing power of the dollar [and] telling readers how to buy gold. These ads are being confirmed by the rising price of gold. The public is finally “getting it”. As Lincoln put it, “You can’t fool all of the people all of the time.” Clueless as the American populace is, they are finally learning about gold, something that their great-grandparents took for granted.

Concluding Comments

The great and harsh lesson of history that now stares Americans in the face is that NO fiat currency in history has ever survived which  underscores the growing panic to get out of dollars and out of all fiat currencies. Ironically, those who are rushing into dollars or dollar-denominated bonds and blue-chip stocks on the thesis that these are “safe havens” are [just] rushing out of dollars to get into other forms of dollars.

What’s happening now is on a greater scale than has ever occurred before in the history of mankind. It’s going to hit the current generation of Americans like a whirlwind. It will be historic in its intensity and destructiveness. The great gold rush of 1849 opened up the American West. This gold rush of the early 2000’s will open up the eyes of Americans to the danger of the Federal Reserve and fiat money…

*http://www.321gold.com/editorials/russell/russell042111.html

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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