US$ — Slowly then rapidly
Foreigners increasingly distrust the dollar, which is why central banks, the ultimate insiders are selling them for gold. The decline in the $ has not been noticed by Americans — yet.
The chart above prices the dollar, which is only imaginary money, in real money which is gold. In 1968, when the exchange rate was $35 for an ounce of gold, if you bought $1,000 by selling 28.57 ounces of gold that $1,000 would be worth only 0.22 ounces today. The loss is represented by the double-headed arrow in the chart above. The pace at which the dollar’s value is slipping is now accelerating, even plotted on a log scale.
Of course, the relationship is almost always presented the other way round, showing gold having risen from $35 to $4,540 giving the illusion that gold is rising and the dollar is constant. The illusion continues to fool investors and commentators in G7 capital markets, but it no longer fools other foreign holders of the dollar, principally the Chinese. This is why gold and silver are being drained out of London and New York. Central banks and sovereign wealth funds along with increasing members of Asia’s private sector actors are dumping their excess dollars and other G7 currencies, encashing them for real money without counterparty risk.
Slowly and then suddenly, is what Hemmingway said about bankruptcy. National bankruptcies are no different. But the way they are reflected in national bankruptcies is different, being exposed by loss of faith in the currency and the growing realisation that it is only imaginary money.
That is ahead of us, how far is difficult to tell. This week, gold and silver were on
