On Friday, Larry Kudlow wrote an article discussing the US Dollar. In his article, he writes: "We know that gold is soaring.
And we know the dollar is slumping. But, did you know that year-to-date, while the S&P 500 is up 18 percent—a great showing no doubt—gold is up even more.
The precious metal is up 21 percent. In other words, measured in true, gold-backed purchasing power, stocks have really done nothing this year. Zip. It is most disappointing... What we’re seeing right now is pretty close to what we witnessed in the 1970s—the rise in gold and inflation really cuts into the stock market.
So what’s the way out?
Well for starters, we need a stable dollar to stop inflationary pressures. And we also need lower tax rates to spur the economy, help it grow, and reduce unemployment."
He also goes on to mention, "In addition, the Treasury ought to get out there and buy these unwanted dollars in the marketplace. Just go out there and bid for them. And they need to stop printing so much debt from Congress. All this massive spending and borrowing is killing us. We need to be slashing tax rates on large and small businesses. There’s just no better place to begin job creation."
Full Article Here
I agree with Mr. Kudlow. With gold at its highest rate ever and considering that The Federal Reserve has DOUBLED the amount of US Dollars in circulation in one year, clearly inflation is coming.
This video was aired back in January, so the amount of money in circulation now is even higher. However, the money that The Federal Reserve printed approximately one year ago is just now starting to enter the market.
Two other nations in recent history have/had major inflation. One was the Weimar Republic (Germany) after World War I. According to PBS around 1920 "Milk went from 7 Marks per liter to 16." After 1920 "The printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks....When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning."
The Germans printed more and more money without it being backed by gold, and destroyed their own currency. The other example is Zimbabwe. I was in Southern Africa this summer, mainly in South Africa, however I was near the border with Zimbabwe. I was given a legal tender of 50 billion Zimbabwe-Dollars. You need 100 billion Zimbabwe-Dollars to buy a soda. While I was there, I was told the Zimbabwe-Dollar collapsed because of inflation (and printing money) and Zimbabwe has since abandoned the currency.
Since 1973, our currency has not been backed by gold, and since we are printing money without anything that is backing it up, we are going to have inflation, as Mr. Kudlow mentions. People are trusting gold more than the US Dollar, this is why it is over $1,000 dollars an ounce. The only way we can stop this, before we go down the same path as the Weimar Republic or Zimbabwe, is to create jobs. The way to accomplish this is to lower taxes for businesses and make it lucrative for companies to be here.
Other nations are showing concerns about the U.S. Dollar, as well, our national debt, which is about 12 Trillion Dollars. Last Tuesday, The Independent Newspaper reported "Gulf Arab Nations are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."
If the World thinks the dollar is no longer "the standard" when it comes to currencies, then we may have tough financial times ahead of us, and a new financial crisis, much worse than what we experienced a year ago.
If we don't stop printing more and more money, and unemployment keeps rising; prepare for massive inflation and a possibly a depression. I hope that I am wrong and that President Obama, along with the rest of our Government and The Federal Reserve, can solve these issues by creating new jobs, reducing unemployment numbers, and stopping our national debt from rising.
Christian
Note: this Article was made for one of my classes in school where we had to respond to an article.
Works Cited:
Amadeo, Kimberely. "History of the Gold Standard." About.com. Web. 10 Oct. 2009.
Fisk, Robert. "The demise of the dollar." Independent UK. 06 Oct. 2009. Web. 10 Oct. 2009.
Goodman, George. "The German Hyperinflation, 1923." PBS.org. PBS, 1981. Web.
Http://www.usdebtclock.org/. Web. 10 Oct. 2009.
Inconvenient Debt - Glenn Beck. Dir. Fox News. Perf. Glenn Beck. Url: http://www.youtube.com/watch?v=lNS8IY_Td14.
Independent UK Newspaper. Torn-Dollar. 2009. Photograph.
Kudlow, Larry. "Save the Greenback, Mr. President." CNBC. 09 Oct. 2009. Web. 10 Oct. 2009.
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