Real Money Terms
This century has treated us well so far.
Today, we cautiously emerge from our Maximum Safety shelter to assess if circumstances have shifted.
Since 1999, the dollar’s buying power has dropped by about half. Yet with our preferred currency — gold — prices have actually declined.
What are the two biggest expenses most people face? A house and a car.
When priced in dollars, a house costs more than twice what it did at the end of 1999. But measured in gold, the cost plunged from roughly 750 ounces to about 80 ounces—a staggering 90% decrease.
Similarly, the Ford F-150’s price rose from about $21,000 in 1999 to near $30,000 for the basic model today. Yet in gold, the cost dropped from 75 ounces to approximately 6 ounces—a 90% reduction once again.
This might be a rare anomaly or could point to a much larger trend. It may roughly reflect the decline of the US empire. In broad terms, total US output stood at about $10 trillion in 1999.
Today, it reaches $30 trillion. In gold terms, that was 36 billion ounces at the century’s start but has fallen to just 6 billion ounces—an 83% decrease. Adjusted for real money, US economic output no longer holds the value it once did.
The exact implications remain unclear. These figures are relative measures, not absolutes. Other countries have also seen comparable declines against gold. Moreover, it’s unlikely that real output will keep declining so sharply in real money terms.
The pattern seems to extend to capital assets like stocks. The Dow began the century near 10,000. Investors who stayed the course would have gained approximately 4.7 times their initial investment.
Not a bad outcome, certainly.
In gold terms, you could buy Dow stocks for 36 ounces in 1999. Nowadays, 36 ounces would fetch you four Dow indexes. The true worth of American capitalism, measured this way, has diminished to about a quarter of its value 25 years ago—a 75% decline.
Will this trend persist?
It’s possible. Stocks fluctuate in gold terms, swinging from very cheap (1980) to very costly (1999). Since then, they’ve declined, yet remain not especially cheap. We anticipate that they will become cheaper, though not through a rise in gold prices, as real output is already inexpensive relative to gold. Instead, the correction likely will emerge from the stock market itself—possibly through a drop in the dollar, falling stock prices, or a combination of both.
Meanwhile, Rajan Menon examines the dollar’s decline.
Gas prices have soared since February 28, the day the war began. Benchmark Brent crude has crossed the $100 mark three times and at one point reached $120. The price fluctuates but has remained well above $66.60, where it stood on February 27. On March 16, the average price was $3.71/gallon compared to $2.92 on February 28 — a 24 percent increase.
Menon highlights the 13 million heavy cargo trucks operating in the US, which generated nearly a trillion dollars in revenue last year. On March 2, diesel fuel cost about $3.89 per gallon; today it averages nearly $5. Transportation costs are rising.
Farm commodities are also increasing in price. Fertilizer costs have risen by roughly one-third over the past two weeks. A large portion of the supply originates from Gulf petrochemical producers. Farmers will inevitably transfer these expenses to consumers.
Additionally, consumers face tariff rates of 10% to 15% on all imports, compelling households to tighten their budgets.
But the feds have access to all the fake credit they want. No need for them to cut back. They took in $2.1 trillion in tax revenue so far this fiscal year. But they spent $3.1 trillion. Uh oh. That’s a trillion-dollar shortfall…$200 billion per month.
And those figures exclude war expenditures, which currently exceed $1 billion daily.
Government projections tend to be notoriously unreliable. Both time and expenses are frequently grossly underestimated. For example, the Iraq war was initially projected by the Bush Team to cost $50-$60 billion. The actual total now tallies around $5 trillion—100 times higher.
Like Russia and debt, wars are simple to enter but challenging to exit.
Given these factors, we will remain within our Maximum Safety position—at least until the situation becomes clearer.
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