By: Bill Bonner
Charles Dawes was a decent man.
As far as we know, only one American vice president ever made a contribution to public life worth remembering. That was Charles Dawes, vice president under Calvin Coolidge.
Mr. Dawes was a Chicago banker who was also a songwriter. He wrote the tune for what became a popular song – “It’s All In the Game.” Many a tear has to fall…but it’s all..,in the game
He also won a Nobel Prize for coming up with a plan – the Dawes Plan – for ending the reparations arguments following WWI. As with so many Nobel Prizes, the committee probably acted too hastily. The Dawes Plan never worked.
Dawes operated in a different world. The U.S. dollar was still as good as gold and any money that wasn’t backed by gold was suspect. Said Dawes after composing his song: “I know that I will be the target of my punster friends. They will say that if all the notes in my bank are as bad as my musical ones, they are not worth the paper they were written on.”
Banks issued money back then, bank notes. Sometimes the banks were good for the money. Sometimes they weren’t, but at least customers knew where they stood. If a bank failed, they’d lose money.
Now it’s not so simple. Banks no longer issue their own notes. Now, we all use dollars. But what are the dollars worth? Are they going to be the cause of tears and suffering?
Foreclosures are rising and will continue to rise until March of 2012, according to the projections in the FT (Financial Times), wiping out possibly trillions more in household wealth. Sales are at a 13-year low.
Houses are Americans’ most important asset and the average house is down about 25% since 2006. That’s in terms of dollars. In terms of gold, the loss is over 60%.
Hey, it’s a Great Correction. After such a big run-up in housing prices in the bubble years, what would you expect? Housing prices are bound to run down.
So much the better. Americans are having a hard time making ends meet. They’ll need cheaper housing. Their incomes are falling in real terms. Measured by the official core CPI, incomes are about flat for the last 10 years. Measured by raw cost of living numbers, household incomes are going down by about 3% to 5% per year.
Look what has happened in terms of real money. Some of the world’s most important commodities – including oil and food – are priced in real terms. Oil has soared in terms of dollars. In terms of gold it has barely moved. Food prices go up and down. People may pay a lot more for their wheat and corn in dollars. But if you have gold, almost nothing is more expensive.
The point is, gold is real money. It is not a fiction. It is worth as much today as it was when Charles Dawes was humming tunes. And gold is telling us that the average U.S. family is getting poorer.
Meanwhile, the feds keep pretending that the problem is not enough paper money. People don’t have enough money to spend? No problem. We’ll print up some more Ben Franklins and more Andrew Jacksons.
The average consumer might not be able to tell the difference, but gold knows. And gold tells.
All Things Considered – John’s Commentary
Gold and silver don’t go up, so much as the things that they measure go down. Ultimately, as this article points out in a new light, gold reflects the value of its paper money counterpart.
The supply of gold has always grown at almost exactly the rate of population growth. Hence there has always been approximately as much gold per-capita now as during all of modern history.
Paper currency, however, invariably ends up being printed in increasingly greater and greater amounts, as we are now witnessing in the U.S., Europe, Japan and elsewhere. Gold doesn’t really go up in actual value. Rather everything that measures the value of gold is in decline.
Action to take: The metals are in a consolidation, as they fall back to catch their breath after a rapid run-up. If you wished you had bought more earlier, now might be the time to consider adding that portions you thought you missed out on.
For me, I am not disappointed that I personally bought silver at $31 and it is now at $27. I would be far more disappointed if I hadn’t bought at $31 when the price reaches $50.
What to buy: 90% silver coin is the best buy in silver. There are some very low priced European coins, both 1 ounce and fractional, now available. I have been buying some for my personal holdings.
Quote of the day: “Bullion doesn’t pay interest or dividends, nor does it grow or expand by itself. That’s the price you pay for tranquility.” – Pierre Lassonde
