monetary universe

I've been studying the US Dollar lately… Looking at where it's been, and wondering where it may be headed in the future.

In February of 2001, the US Dollar would buy about 121 mg of gold. In March of 2011, it will buy about 22 mg of gold, a decline of 82%. This drop has been gradual, and the intervening years have been filled with the sell-offs and rallies that are common to all markets. This period has been characterized by massive and growing public and private debts, central bank manipulation to keep interest rates artificially low, and the creation of trillions of new dollars to keep the financial system liquid and stave off recognition of personal, corporate, municipal, state and federal bankruptcies.

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Kenneth wrote in with the following excellent questions:

Hi Charles,

Thanks for your great insight. I have been planning to buy gold and silver early next year and I just have 2 questions.

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Bloomberg News and Priced in Gold

Nov. 6 (Bloomberg and Priced in Gold) — Warren Buffett’s Berkshire Hathaway Inc., holder of a derivatives portfolio worth more than 1.3 billion gold grams, said third-quarter profit declined 29.7% percent on losses tied to equity-linked contracts and the falling value of the US Dollar.

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The last time we talked about the Dow Jones Industrials "breaking through" the 11,000 level was back in April. After spending about 15 days above the 11,000 mark, the Dow sank back below 10,000 in June, and again in July, after which it began working higher, bringing us to 11,006 on Friday, a level which just barely held in Monday's trading, closing at 11,010.

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Subscriber Kerry B wrote to me recently:

I would love to see a long running value of the U.S. M3 in gold. I've wondered if this pool equals a relatively fixed gold value while the dollar price of gold reflects mainly the fluctuation in the amount of money in the pool. Thanks.

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Daniel Rigby wrote to me recently to ask:

This may seem like a dumb question, but I am unsure of how to actually price things in gold myself. Is it on a per gram basis? Could you provide me with an example of how to price something in gold, say dollars?

Thanks for asking, Daniel! That's a great topic that I haven't covered lately.

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As September, 2010 comes to a close, the US Dollar continues falling to new all-time lows, now below 24 mg for the first time in history. At the same time, the National Bureau of Economic Research (NBER), whose Business Cycle Dating Committee is charged with defining when recessions begin and end, has announced that the recession that began in December 2007 ended in June of 2009.

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There has never been a better time to switch to gold. By that I mean to choose gold as your unit of account, your personal money. To hold your savings in gold. To measure your investment returns in gold. To keep your books in gold. In fact, it's not just a "good idea", it is vital to your future!

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Subscriber Ian Shearer recently wrote to point out that although the site covers the price of Oil, the world's most traded commodity, we're missing the number 2 commodity, coffee! Given the number of espressos we make around here every day, that is an omission that had to be corrected.

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