Gold Hasn’t Lost Any Value, the Dollar Has Just Strengthened (Video)
Jim Rickards appeared on Bloomberg to explain why gold hasn’t actually lost any real value. It’s just the strength of the dollar that has pushed down nearly all commodities and currencies. Rickards argues that now is a very good time to buy the yellow metal, especially if you’re looking for the safest way to preserve your wealth from fluctuations in fiat currencies.
Highlights from the interview:
Rickards: You say gold has lost X%, 70% of its value. To me, gold hasn’t lost any value. What’s happened, is the dollar has gotten stronger. So if the dollar is the measure of all value, then yes, gold is down a lot… But make gold the measure of value and ask ‘What’s really going on?’ A dollar used to get you a fourteen-hundredth of an ounce, today it gets you an eleven-hundredth of an ounce. You get more gold for your dollar. This is really a strong dollar story. If you look at iron, wheat, aluminum, copper, commodities around the world – they’re all down. Look at currencies: Australian dollar, Canadian dollar, they’re all down… A strong dollar is deflationary. The Fed wants inflation, so how on earth can Janet Yellen raise interest rates…
The S&P priced in gold. If you put that chart up again, what you’ll see is a buy signal there… Last time gold was this low relative to the S&P, it was a great time to buy…
David Zervos: If you believe in innovation, then stocks are a far better trade. If you believe we’re going to be in the 70’s and all real returns on capital are going be negative… then gold’s a great trade…
Rickards:I love innovation. I don’t necessarily believe in the dollar. Everything David said is measured in dollars. If the dollar collapses, your wealth goes away… The problem is what’s the best way to preserve wealth? You’re innovative, you make money. What’s the best way to preserve it? You don’t want to end up like those people in Greece lined up at ATMs. It happened in Cyprus, it happened in Greece, it can happen here…
David said gold is good for inflation, not deflation. That’s not correct. The longest period of sustained deflation in American history, 1929 to 1933, gold went up 75%… The president wanted inflation [at that time] so you could afford to pay your debts. The problem is right now we have deflation and no gold standard, so how are we going to pay the debts? … The raised the price of gold… because he wanted the inflation. They were desperate for inflation. We’re getting to that point. We’re in a very deflationary world. When the government becomes sufficiently desperate for inflation, there’s always one way to get it, which is for the government to raise the price of gold…
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