A major article in January 2nd Journal is headlined just that. “Japan’s Lost 30 Years Give Pause to Those Looking at The U.S.” A picture showing dejected Japanese is sad, and an accompanying graph shows the American S & P going up at a 45 degree angle while the Nikkei 225, stays in a straight line. There are many paragraphs and even a graph showing the ratio between the Yen and U.S. dollar, and that looks about the same as the Nikkei.
I’m no good at analyzing currencies or stocks, as I don’t have a single stock or foreign currency to my name. I doubt that the major article is false about the Japanese stocks or currency, but I thought I’d look up the price of American stocks and gold in 1989, and here they are. The Dow-Jones was at 2752, and gold was $411.60. The 30 Dow Jones stocks have gone up 1000% and gold has gone up 400%. Remember, the Dow Jones average consists of 30 stocks, and the content of the 30 changes a lot, many times some being taken off and some added, so I doubt that the 1000% is accurate, where as the gold price is for a single item, and 400% is healthy.
Here’s another interesting item about gold and the dollar’s price. For a hundred years, America had no inflation, and the dollar’s relationship to gold remained steady, with the price of gold being $20.67 per ounce. Why was there no inflation? Because there was no Federal Reserve…to be brief. You figure: Politicians know that they love their office and want to remain there as long as possible, and even for a virtual lifetime, as some have done, their death being the reason they couldn’t stay longer. The longer you remain in office, your literal office gets bigger and more alluring, thanks to seniority, not counting the glory of having your name recognized by your constituency. Lots of travel, free postage, and staff, and it must be glorious. How to remain? Easy. Keep on promising more handouts from the public treasury, and more stuff being voted affirmatively for your folks back home. Works every time. Before the Federal Reserve, which prints money out of thin air to loan to the U.S. Treasury at interest, the budget had to be balanced, or close to it anyway, and Congress had a very difficult time voting handouts, when they couldn’t be paid out of revenues.
The dollar has inflated 7500%, literally, meaning prices have gone up that much at least in relation to gold. Sound absurd? Do this: On your calculator, multiply $20.67 by 7500%, and it comes out gold will be $1550.25 per ounce. In 30 years my home has tripled in “value,” except it is still the same home which has been well cared for, and I am certain the same percentages have held for most consumer or real estate things.
Inflation protection then, in my opinion, should be based on physical things, not paper money, or stocks. What has happened to paper money is obvious, and as far as stocks are concerned, there are thousands of them, and which ones to pick, is difficult, and especially since it is said that 85% of stock trades are made by computers. When should one buy gold? Look for highs and lows? Of course, but who knows when they are or will be? How about when you have a surplus of dollars? We do know that if you miss a low or a high, the ultimate price will be only one way, and that is up in dollars. Unless you believe that even Donald Trump can ever balance the budget and make gold go down more than for a short time.
Don Stott
– don@coloradogold.com