APR 24, 2018
This will be the most boring chart you will see today, but it speaks loudly and definitively.
The purchasing power of a US dollar began the process of its permanent erosion as soon as it was uncoupled from gold-standard backing. And that erosion has never stopped.
The endgame is zero value. It's a one-way street. The USD will join its many historical counterparts on the worthless junk heap of fiat currency experiments. And gold? Gold will hold its value in full, as it always has for thousands of years.
The CPI shows a distinct upturn and secular change to inflation as a necessary component of the modern financial and economic system… right from the time the US dollar was given its final severance from gold in the early 1970s. Not only is inflation desirable to developed economy governments and their central banks, it is absolutely necessary. So is theft of peoples’ purchasing power.
So what is the bond market going to do about it? As the thing in the chart directly above has risen over the decades this thing has gone the other way, apparently unconcerned about inflation because a little inflation is good say the Keynesian economists. Well, it is only good because the alternative is economic destruction in a Keynesian system.
How can it not be in an economy debt-leveraged to the tune of over $20 Trillion? Let’s take another view of it. From USGovernmentspending.com comes this pie chart showing government spending targets.
One of the smallest pieces of pie is Interest, at 6%. What will happen if that piece of pie begins growing? It would start crowding out other areas, whether they be Pensions, Healthcare or Education. Defense?
That sacred cow can probably be expected to continue as is, but if it were to suffer cuts the defense contractors that lobby Washington 24/7 to keep that slice nice and healthy would be in trouble. They, along with much of the rest of the pie are intimately tied to the economy. Pensions/SS is the conspicuous, non-productive one.