21st Century Monetary Mayhem: "The Dolla 'Ain’t' Worth A Quarta"

As I write this hub, the price of gold is going through the roof. Beginning in March of 2008 (when the U.S. economic engine mysteriously started back-firing) the price of gold—for the first time—topped $1,000. A year later in 2009, that record was broken when the intra­day spot price of gold spiraled out of control to a new high of $1226. Still further, on October 14, 2010, gold closed at an even higher mark of $1373.25. Just so recently, as indicated by the Wall Street Journal’s Market Data section, the price of gold stands at an all time high reaching a staggering price of $1,740 per troy ounce.

Why has the price of gold gone out of control? To begin with, Americans are, day by day, becoming more aware of our dire monetary crisis: real estate’s become a kamikaze investment, stocks & bonds are both laced with market uncertainties; thus, it stands to reason—from a pure investor’s perspective—to throw dollar bills at anything other than real estate and stocks & bonds. According to Michael Sivy of the book titled, Rules of Investing, “Gold is the most misunderstood investment. If used properly, it protects you against some of the biggest threats to your wealth—and offers you a shot at easy profits.” In a market based “fiat-dollar-driven” society, citizens have to invest their “paper-dollars” somewhere—nevertheless, many invest in small businesses, a vast majority invest in shares of big corporations, still there’s plenty that invest in both raw & habitable land but for the savvy investors that craves complete protection from a loss of a currency’s purchasing power, many instinctively find themselves investing in commodities—i.e., silver and gold.

The one solution to maintaining the dollar’s future purchasing power went out the same window as the gold standard: in the absence of the gold standard, there’s no conceivable way to protect the U.S. dollar’s purchasing power from confiscation through inflation. It could only be a matter of time before the 21st century’s monetary metamorphosis mayhem sends this massive inflationary shockwave through our economic engine’s sparkplug wires, thus causing a possible engine burnout—relegating today’s dollar as tomorrow’s quarter. The only recourse the American people have will be the one thing that could have prevented it.

Naturally, as a hedge against a potential Third World style hyperinflation, we should continue to see great interest in gold as an investment. It’s already happening; the high gold prices are an economic sign post that something big could potentially be on the horizon. Up to this point, it’s been only the “savvy investors” that has gotten a jump on all the rest.

What about hyperinflation?

What’s hyperinflation? In a market based economy, hyperinflation is a pretty nasty situation where normal inflation becomes astronomically high or "out of control," a condition which causes a rapid increase in the overall price level; thereby rendering a nation’s currency virtually worthless overnight. In a kamikaze economy, hyperinflation is the direct result of a “savings-phobic” society: people rejecting the idea of “spending later” and began to jump on the bandwagon of “spending now” to beat anticipated rises in prices. When businesses start to do the same in buying capital goods, overall price levels begin to intensify thus normal inflation begins to spiral “out of control.” Although more prone to Third World economies—i.e., Nicaragua, Angola & Zimbabwe—the perils of monetary metamorphosis mayhem aren’t exclusive to developing nations: even an advanced economic engine like the United States can catch a fire from “out of control” prices.

What’s causing the dollar’s demise?

Since the introduction of the euro, the U.S. dollar has been having a hard time holding value. The euro, even with all the Eurozone’s recent troubles, is still a stronger currency based solely on the European Central Bank’s reluctance to “abjectively” intervene in the marketplace every time there’s a panic. Add in the fact that the U.S. have a trade deficit close to a half a trillion dollars, a near zero savings rate and a heavily distorted monetary system via the Fed and it’s no surprise today’s U.S. dollar is being compared tomorrows U.S. quarter. Whenever a central bank of a sovereign nation over steps its mandates of “price stability” and “high employment,” in essence what its doing—in an officious manner—is disturbing the natural fluctuations of price mechanisms within the market place.

Solutions to our problems!

How do we overturn it? In other words, how do we put an end to this monetary metamorphosis mayhem? Here’s the thing that most Americans don’t want to talk about: we have an almost nonexistent manufacturing sector in this country, whereby all the good paying “low-skilled” jobs are located overseas. This said, today’s U.S. economy consist mostly of menial service paying jobs in conjunction with a burgeoning technology sector that mainly caters to the “high skilled” job candidates. The average U.S. consumer is in a daily battle against consumer debt and it seems no one wants to make “things” anymore. How do we get our engine roaring again? The short answer is: “Ideas, Ideas, Ideas.” An economic engine can’t work without a continuous manufacturing of novel goods. The backbone of the U.S. economy has always been based on manufacturing, which brought along with it very good high paying jobs.

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