A rather scary look at things by Daniel Oliver at Forbes – comparing our current situation to where we were just prior the inflationary spiral of the 1970’s:
…From 1969 to 1980 the dollar lost 96% of its value in terms of gold and 92% in terms of oil. The stock market was no safe haven: The Dow’s nominal value in 1980 was the same as in 1969, meaning it lost similar value against gold and oil.
In the current cycle, the dollar and the Dow began deflating in 1999. With gold at $1,400 and oil at $90, the dollar and the Dow have declined by nearly 80% against both. To match the 1970s, they would have to lose another 80% against gold and another 60% against oil, implying gold at $7,000 and oil over $200. Given that the current monetary abuse is far worse than in the 1960s and 1970s, these figures are conservative…
That is a big, old “yikes!” moment. I hope Oliver is wrong – but I can’t see the hole in his argument. Given the amount of printing by our Federal Reserve and central banks around the world, just how would we avoid such devaluation of our currency? Remember, this doesn’t take hyperinflation to happen – we had 14% inflation in 1980 and that was the worst year of it. All it took for that kind of price rise was, probably, an average of 7 or 8% inflation per year.
We really need to get Bernanke to turn off the presses – and Congress to balance the budget. If we don’t, then the price we pay will be very, very high…much higher than any pain a cut off of fake money would be.