A Dollar, a Euro and an Ounce of Gold Are Sitting on a Plane…

by | May 16, 2010 | Precious Metals | 22 comments

After watching the foreign currency exchanges for the last couple of months one would think that whatever problems the dollar had in 2008 and 2009 are long gone. With the Euro predicted to collapse to near parity with the US dollar, and the British Pound slated to be one of the next to go, mainstream analysts the world over are hinting that US Treasury bonds and dollar denominated assets are the next bull market, and the safest place to be if the global stock markets were to crash again.

In his latest One Handed Economist, Howard Katz puts forth an analogy that should clear this up for those who may be a bit confused about how to safely secure their assets and preserve wealth:

Gold is a jumbo jet cruising along at 30,000 feet. The national currencies (dollar, euro, yen, pound, etc.) have bailed out and are parachuting far below. Are the national currencies stable because they are not sinking against each other? Not a chance. They are all sinking against gold and other real goods. The amount of food, clothing and shelter they buy in their home countries keeps going down. So for the time being it will be wise to ignore the various comparisons of paper currencies against each other. They are merely an illusion to convince you that things are normal, there is nothing to be worried about and you are not getting poorer.

Measuring economic recovery in terms of the dollar and US stock markets is a dangerous game to play with your wealth.

As the EU prints billions upon billions to bail out Greece (et. al.) by paying off their debtors (big banks), the Euro will continue to depreciate. But the question that you must ask is: what will the Euro depreciate against?

If one compares the Euro to the dollar for the last 60 days, it looks like the dollar would have been a great investment to hold.

But if we look at the Euro and the Dollar compared to an ounce of gold, we see a whole different story:

gold_60_day_o_usdgold_60_day_o_eur

Both of these currencies have lost ground to gold in terms of purchasing power in the last 60 days. And the 10-year charts are not much different, with gold appreciating significantly against not only the Euro and US Dollar, but every other national currency in the world.

Thus, it is important to keep currency fluctuations in perspective, with the focus on buying power against real, tangible assets, not what one piece of paper against another piece of paper is worth.

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    22 Comments

    1. Scab

      Gee whiz…I never thought that the fiat currencies hitting the wall would take this long. Tick tock tick tock tick tock. So what do you think? This year June/July? Stretch it to 2011? I wish it would just happen sooner than later. I’m not getting any younger or better looking, ya know.:)

    2. Patriot One

      Great analogy!!! Its simple and people an relate. Comparing paper money to paper money is no longer viable. By compareing your money to food and fuel you can really see how much your household has lost in terms of purchasing power. If we continue with the Febuary 2.4% increase in food prices that will equate to over 30% for the year. Think of it as loosing 30% of your income. How much of this can we take before the whole system falls apart. I often wonder why more people are not talking about the bi-flation we can see all around us. Housing and cars are deflating and food, fuel, and metals are off to the races.

      To Scab: Its just a matter of time. If the governments of the world cut 50% of spending it would not be enough to stop the damage that is already done. Remember it took us 87 years to get here.  You can not spread the wealth; everyone need to pull their own weight. The Bible says if you don’t work you don’t eat. Its really a pretty simple concept.
      It also say that we need to take care of the widows and orphans. Jesus said the poor you will always have. I believe we are just about out of time!!!

    3. zukadu

      Not to worry Scab. Fiat currencies hit the wall on 5/24 at precisely, 4:03 pm Pacific Time. Make sure you are out of the market by then.

      Continental Dollar anyone?

    4. DaveyBoy

      Zukadu, I’m just wondering how you came up with that projected date/time. Thanks.

    5. admin

      DaveyBoy – Zuk has given us a riddle in previous comments:

      524 402 925 TCA

      This is the when, where and what of an event — THE event…

      We know May 24…

      We know 4:03 is when currencies will hit a brick wall– but what concerns me more than 4:03 PM, is what happens at 4:02 Pacific…

      925 ….

      TCA…

    6. jaream

      ZUKADU- IHAVE ENJOYED YOUR PRIOR POSTS. BE CAREFUL WITH PREDICTIONS , THE DAY AFTER; MAY 25, YOU WILL BE RESPECTED AS MUCH AS A HUNGOVER COLLEGE SLUT DOING THE “WALK OF SHAME ” BACK TO HER DORM SUNDAY MORNING AFTER A NIGHT  OF [email protected]%&*!?

    7. 20smoney

      What is the deal w/ the 4:03 may 24th thing? I dont get it.

    8. double wit

      if the 4:03 time and the 402 in his “code” are supposed to be the same thing, well, he now has a minute discrepancy to explain.

    9. double wit

      and 4:03 pacific time,  I believe the Forex will be closed

    10. Jonny V

      TCA, total civilian anarchy?

    11. PL

      hmmm, according to wikipedia,  “Sterling silver is an alloy of silver containing 92.5% by weight of silver and 7.5% by weight of other metals, usually copper. The sterling silver standard has a minimum millesimal fineness of 925.”

      …the British Pound

    12. zukadu

      Very astute observation Mac. I figure it will take about a minute for the news to reach China markets.

      Jaream, I love your perspective and considered exactly that before my original post. Regardless of what does or does not happen, I will provide full disclosure for the riddle and I believe the evidence that I can provide will justify my prediction and the post if nothing happens.

      If it does happen, precisely as I have reported it, we will ALL have much to reflect upon as it will give a totally new perspective to our lives; which is the reason I was willing to make the post and take the heat.

      Jonny V: I see you are smoking that Canadian Cannis again! Actually JV, the anarchy should be “regionalized”, but not “localized”.

      Double Wit: For all intents and purposes, Forex is open 24/7, so there is always a bull or bear market somewhere.

    13. Jonny V

      I get it, the 925 is because you’re an Oakland Raider fan, and that’s their area code.  🙂

    14. zukadu

      JV:  There is no area code in the code. There is a decimal point, however. If you guess 92.5 I am going to think that is your IQ. If you guess  .925 I am going to believe that this is the THC level in that Canadian Cannis you smoke! Oh, I forgot! Thats medical marijuana in Seattle. 🙂

      No more clues today.

    15. double wit

      I meant here and London, the only 2 places to have enough play to create a signficant drop, it will be closed at both locations 4:03  or 4:02 depending on which “mistake” is the wrong one. PST. and the only places it could happen where it would take “a minute” to reach the China markets.  I call BS!! 

      New York opens at 8:00 am to 5:00 pm EST
      Tokyo opens at 7:00 pm to 4:00 am EST
      Sydney opens at 5:00 pm to 2:00 am EST
      London opens at 3:00 am to 12:00 noon EST

      You have a week to be proven wrong, which you will just as all “prognosticators” are who try to be the worlds first and only by giving a specific time.

      Start thinking of a new posting name……

    16. admin

      Zuk, I actually ended up checking out the Richter scale specifics last night wondering if 9.25 is a measurement they use… I’ve never seen a richter value to the 1/100 but I guess it’s possible… I thought I had it with this one — yet TCA eludes me for now… However, based on your above comment, this event has a clear time line, and is not necessarily an earthquake prediction, as that would be nearly impossible to make unless we’re talking about some sort of God Time coordinates, which, after more contemplation seems a bit more unlikely than I thought a few days ago..

      JV: I got the Richter idea from checking out Oakland based on 925 and realized San Andreas runs right through it…But, Zuk says no area code, thus we are off on this one.

      PL: Good thoughts on the Sterling…. The only issue there is that it will be middle of the night in the UK, so I don’t expect any news coming out of there that would impact global markets…

      DW: I, for one, will not lose any respect for Zuk if this timing/event call doesn’t pan out. His contributions and insights at SHTF Plan have been invaluable for the last several months. As he mentioned above, there is likely a very specific reason why he happened to choose this date, time and as of yet unknown event.

      This is quite an entertaining puzzle, but to be honest, I hope Zuk is wrong, because if he’s right, he has advised that this is going to be a more or less destabilizing event. However, it will not be the end of the world, as Zuk has pointed out in other comments that we still have poll shifts and the possibility of solar EMP to deal with circa 2012 – 2015.

      Hmmmm….

      Mac’s status: Puzzled, Intrigued.

    17. Jonny V

      The puzzle is interesting for sure.  The large scale, natural events that we can have confidence in seeing are;
      1; high solar activity in 2012, this is within the natural cycle for the sun, and 2012 is right on schedule.
      2; large scale earthquakes along the subduction zones (think Pacific ring of fire here).  Earthquakes are common on the ring, so having one would not be a surprise.
      3; there are 69 major tropical storms forecast for this year in the Atlantic/Gulf of Mexico, with 6-8 major hurricanes.  Ought to make for a real good mess with all that oil.  DRILL BABY DRILL!!    WEEEEEEEEEEE!!!!
      4; lastly, the earth’s magnetic pole reverses itself every few hundred thousand years.  Apparently, we are due.  I don’t believe in the whole shifting of the axis thing, but reversing magnetic poles would cause lots of mayhem.

      Don’t know how any of this fits in with Z’s little puzzle……….

    18. zukadu

      I appreciate the backup guys, I really do. The proof of the pudding is always in the eating of it: even if the pudding is crow.  🙂

      Once the “information” was in my “possession”, about 40 days prior to the event, I could share it or keep it to myself. I gave it much thought. The easy thing to do would be to keep this to myself and not take the heat for it, should the event fail to materialize. If it does materialize, I’m not looking for 15 minutes of fame: who needs Larry King, Dancing With The Stars, and paparratzi ? But, you can throw all the money at me that you want!

      If it does materialise, as I believe it will, I may need to change my post name. Otherwise it will remain the same. Either way, I will reveal all on the 25th. I hope everyone has enjoyed the puzzle. There is sufficient data in all my posts now to decipher all the clues.

      Winner gets a free trip to Disneyland from Mac’s Free Party 🙂

      If the event does materialize as I believe it will, I can take no credit for it, or even boast of my “prediction”.  I am merely passing the information on because, as powerful as the event may be to contemplate, and as profound as the implications of the aftermath may be; the fact that the event was precisely published well in advance of the event manifesting is even more powerful than the event itself, and even more profound than the aftermath, as grim as that might be.

      Two words: shock and awe.

    19. admin

      So, I posted yet another theory on the Zukadu Code in this comment. I think I’m close this time.

      For the record Zuk, the Free Party does not discriminate — we are all considered winners, and as such, EVERYONE gets to go to Disney Land for free! Yay! (Except it might not be there if my new theory is correct).

    20. double wit

      If it is that horrible and ” a certainty” then you are shirking your responsibility as a respectable  human to come clean with what you know so as to help as many people as possible be prepared! Thus this is complete and utter BULLSHIT!!  You sound like the same guy on some of those conspiracy forums going around every few months with almost the exact same “mysterious” warnings and they are always BULLSHIT!!

      If you are wrong, you will have lost respect and thus will probably want to change your name.  If you are right then you instantly become a scumbag for not giving a complete warning, and a new posting name will be mute as there will probably no longer be a SHTF plan to boast onanyways, right?

      BULLSHIT  and ho -hum, yawn….  Thats  my prediction.

    21. zukadu

      As High Commander, Sponsor, and Chief Mucky Muck of the Free Party, Mac, the Prize Committee has determined that you cannot qualify for a prize and are ineligible to win even if you are right.

      European participants must pay their own way to Anaheim where they will be given the E-ticket ride of their life.

      Prize Committee

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