The Great Dollar Paradox, Solved

Why King Dollar Still Reigns Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] The Great Dollar Conundrum, Solved - Solving the great dollar conundrum… - The one true yardstick to measure inflation… - King Dollar is nearing the end of its reign… [External Advertisement] [This Device Will Make American Manufacturing Great Again]( [Read more here...]( See the device in the box on this table here? It’s the size of a desktop computer… and functionally has the same manufacturing power as the assembly line. It’s creating 63 million new factory jobs… right here in America. MADE IN AMERICA is back! And one small little-known company is at the forefront of this $100 TRILLION shift. [Click Here For Full Details]( Portsmouth, New Hampshire December 22, 2021 [Jim Rickards]Dear Reader, Will anything dethrone King Dollar? At least in the short run, the answer appears to be no. The U.S. dollar index (DXY), as tracked by The Wall Street Journal, has moved relentlessly higher since last spring. And that’s despite the massive amounts of monetary and fiscal stimulus that have taken place since last spring. The U.S. has other embedded economic problems, including tens of millions of prime-age workers who have dropped out of the labor force and are not looking for jobs. While not technically counted as unemployed (because they are not seeking work), they’re certainly unemployed in any common-sense definition of the term. Now comes the breakdown in the global supply chain resulting in bare shelves and delayed deliveries at the height of the Christmas shopping season. This is topped off by the highest consumer inflation in over 30 years. The price of everything from gas at the pump to meat and milk in the grocery store is soaring. Inflation has many causes. Both the money printing and the supply chain disruptions contribute to it. The greatest danger is when inflation expectations rise and consumer behavior causes inflation to feed on itself in the form of bringing demand forward and hoarding goods. That’s not a particularly rosy scenario for the U.S. economy. Solving the Dollar Conundrum Then why is the U.S. dollar so strong in foreign exchange markets when its fundamentals are so weak? The answer to the strong dollar conundrum is to look for another measuring rod. It’s true the U.S. dollar is strong against the euro, yen and Swiss franc. Yet those are all paper currencies and none of them is backed by gold. When you compare one paper currency against another, it tells you something about paper money capital flows, but it tells you little about the value of currencies measured in hard assets such as land, gold, silver, water, oil or other natural resources. That’s where gold comes in. It is a form of money although central bankers won’t acknowledge it. If gold were not money, why would the U.S. hold 8,133 metric tonnes of gold? Why does Germany have 3,359 metric tonnes? Why do Italy and France have about 2,450 metric tonnes each? Even the IMF has 2,814 metric tonnes. Central banks collectively hold 35,554 metric tonnes of gold, or 20% of all of the aboveground gold in the entire world. The answer is obvious — gold is money. Central banks simply won’t admit it. Recommended Link [Buy V__E NOW!]( [Read more here...]( Multimillionaire Crypto Investor James Altucher just uncovered an unusually tiny crypto that he believes could soar for tremendous profit potential in the very near future. Here are the quick details: - It’s ticker symbol is V__E. - It currently trades for just $.07… And… - A major market catalyst could send this tiny coin FLYING — as soon as this upcoming week. So how can you get in position? [Click Here For More Details]( The Golden Yardstick Yet gold is a different kind of money. It’s owned by central banks, but it’s not created by them. Gold is not paper money and cannot be issued in unlimited quantities. Paper money is a liability of the banks that issue it. (Just read a $20 bill next time you have nothing to do. It says “Federal Reserve Note” right on the front. A note is a liability.) Gold is an asset, but it’s not anyone’s liability. That’s what makes it different. For this reason, gold is the best way to measure the value of any currency. It gives an objective measure by weight. You’re not comparing one fiat currency with another. You’re comparing a fiat currency with real money. That’s how you know if the fiat currency is strong or weak. When we use this measure, we see that the U.S. dollar is not actually getting stronger; it’s getting weaker. On Sept. 28, 2021, gold was $1,733 per ounce. On Nov. 17, 2021, gold was $1,864 per ounce. That’s a 7.5% gain in the dollar price of gold in seven weeks. When measured by the weight of gold, that price movement translates into a 7.5% decline in the value of the dollar. Today, gold is trading over $1,800, so that’s a big decline in the dollar’s value since September. Fiat Currencies Can’t Hide From Gold So there’s the answer. In the past four months, the U.S. dollar is up when measured against a basket of currencies, but it’s down when measured against gold. In all, non-dollar currencies are down almost 10% when compared with gold. There’s a one-word explanation for this phenomenon — inflation. Currencies may fluctuate freely against each other, but they all fall in real terms when inflation is taken into account. Gold is the yardstick that is most immune to inflation. That means it’s the best way to measure currencies in an inflationary environment. But where do we go from here? Is the current monetary system sustainable? We may be in an age of King Dollar for now, but the king is going to lose his golden crown. My research has led me to one conclusion — we’re going to see the collapse of the international monetary system. When I say that, I specifically mean a collapse in confidence in paper currencies around the world. It’s not just the death of the dollar or the demise of the euro. It’s a collapse in confidence of all paper currencies. Recommended Link [Don’t Buy Any Crypto Until You Read This New Book!]( [Read more here...]( Do not… I repeat… Do NOT buy a single cryptocurrency until you read this new book. This could be the biggest opportunity of your life, but only if you act now. [Click Here Now To Claim Your Copy]( Long Overdue for a Change Monetary systems have changed about every 30–40 years on average. The existing monetary system is 50 years old, so the world is long overdue for a new monetary system. When confidence is lost, central banks may have to revert to gold either as a benchmark or an actual gold standard to restore confidence. That wouldn’t be by choice. No central banker would ever willingly choose to go back on a gold standard. But in a scenario where there’s a total loss of confidence, they’ll likely have to go back to some form of a gold standard. Few remember that Nixon explicitly said that the suspension of gold convertibility by trading partners was being done “temporarily.” I spoke to two members of the Nixon administration, Paul Volcker and Kenneth Dam, who were with the president at Camp David the weekend the suspension was announced. They both confirmed to me that the intention was for the suspension to be temporary. The plan was to convene a new international monetary conference, devalue the dollar against gold and other currencies, primarily the deutsche mark, Swiss franc and the Japanese yen, and then return to the gold standard at the new exchange rates. The first part did happen. There was an international monetary conference in Washington, D.C., in December 1971. The dollar was devalued against gold (from $35.00 per ounce to $42.22 per ounce in stages) and other major currencies by about 10–17%, depending on the currency. Yet the last part never happened. There was never a return to a gold standard. While countries were negotiating the new official exchange rates, they also moved to floating exchange rates on international currency markets. The cat was out of the bag. We’ve been living with floating exchange rates ever since. But that system is pressing up against its limits and can’t continue indefinitely. We’re overdue for a new monetary system, and gold fits the bill. What’s old will be new. Regards, Jim Rickards for The Daily Reckoning P.S. Did you catch my urgent Zoom call this afternoon? It was about [a war that’s been quietly raging behind the scenes in America.]( And it’s serious. Here’s some of what I discussed earlier today: - Why there’s a 90% chance of Russia invading Ukraine in the coming months (and the implications that has for your portfolio, your investments and your way of life) - The real reason for the headlines about the pandemic and inflation (and what they are designed to cover up) - The silent war that’s been raging in the U.S. for the last 20 years (and why I was asked to join the Pentagon at a top-secret weapons laboratory to help them learn how to fight it) - The geopolitical chaos I see unfolding in the coming months (and why it’s imperative you begin preparing now). These are some of the most pressing issues of our time. But just like in war, there will be winners and losers. And I want to make sure you and your wealth are on the winning side. So I hope you were able to catch today’s call. But here’s the good news: If you missed it for whatever reason, you can still see it in its entirety for a limited time. How long, I can’t say. [Click here now to see a full replay of today’s urgent Zoom call while it’s still available.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. 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