A paper by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warns that the Fed’s own policy could lead to “economic ruin.”
The paper titled “Making Sense of National Debt” explains the pros and cons of national borrowing in typical Keynesian fashion. In a nutshell, a little debt is a good thing, but too much debt can become a problem.
But in the process of explaining national debt, Wolla and Frerking stumble into an ugly truth — Federal Reserve money printing can destroy a country’s economy.
Venezuelans have turned to illegally mining gold just to survive.
The Pemon people are native to the region containing Canaima National Park. If you saw the movie Up, you’re familiar with this area. The 500 million-year-old pillars of erosion in the park inspired scenery in the movie. The park also contains world-famous Angel Falls. But with hyperinflation gripping the country and the bolivar virtually worthless, people in the area have turned to digging up football-size mines in search of fragments of gold.
With hyperinflation gripping Iran and sanctions strangling the economy, Iranians are beginning to turn to gold to make everyday transactions, most notably to pay their rent.
The Iranian rial has depreciated rapidly since the US announced its withdrawal from the 2015 nuclear deal and the reimposition of economic sanctions. After the US formally announced it was pulling out of the deal in May, the exchange rate peaked at around 45,000 rials to the dollar. But that official rate was only available to well-connected bankers, importers and businesses. Average Iranians were paying twice that. By July 29, money-exchangers in Tehran were charging around 100,000 rials for one dollar. Within 24 hours, it increased to 110,000 rials to the dollar.
Gold is up. Way up.
I’m not talking about in the US. I’m talking about Venezuela. On July 30, an ounce of gold was going for 211 million bolivars. That’s a 3.1 million percent increase from the beginning of the year.
We’ve said before that inflation is good for gold. The hyperinflation in Venezuela demonstrates this truth by offering us a glimpse into the most extreme situation. It teaches another lesson as well.
Gold could save your life.