“Inflation is always and everywhere a monetary phenomenon.”
– Milton Friedman
If uncle Milty is right, we’re in trouble. From the St. Louis Federal Reserve via Zero Hedge:
UPDATE: In comments, Douglas notes that the chart above doesn’t show the x-axis at zero. Fair enough. Here’s another chart that does:
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For an even more scary grab, look at the monetary base from 1980 when gold was last in a bubble. It was around $200 billion, so a 12x increase since then. Gold doesn’t look so overpriced anymore.
“But suppose you wish to win an argument, shock a reader, move him into action, sell him something. For that, this chart lacks schmaltz. Chop off the bottom. Now that’s more like it”
http://books.google.com/books?id=5oSU5PepogEC
Douglas, that’s a fair point. I’ve added a second graph showing the x-axis at zero so you can see how wildly the AMB has grown.
Part of the reason I highlighted the 12X increase was that I reviewed an article by Rob Kirby recently that looked at some reasoning as to what a bubble price might be for gold, I’ve done the calc’s for silver here.
http://goldandsilverlinings.com/?p=334
You get some incredible prices but it’s what the numbers say.even if you assume the 1980 price high was somewhat artificial and pull it back you still get some incredible prices.
There are also some links that review Martin Armstrong’s gold price assumptions that would seem to support Kirby’s price estimates. Given the monetary increases why would anyone want to be a dollar bug. WRT cash, people are a bit like frogs in a pot where the temperature is slowly increased, they don’t notice the devaluation in their cash when it’s slow and steady.