Performance of fiat currencies

[September 24, 2011]

At times we hear that the dollar is strong, at other times it’s weak. We hear that the Euro is strong, then it’s weak. For example, it should be pretty obvious that the US overall economy is having serious problems. Why is it then that the US dollar appears so strong lately?

Well, one reason is that people think the other currencies are facing even greater problems. You see, the dollar has been rising against other currencies. One US dollar costs x Euro today compared to y Euro three months.

But what if you compared the dollar to the best money around? Which one is that? I can tell you that then the story is different. If we compare the US dollar and the Euro to our favorite money, gold, we see that the Euro and the US Dollar has had a terrible year. The dollar is down X% and the Euro Y% in the last three months alone. You can see this in the table below.

TABLE 1 – sorry but it has gone missing in action

So we see that the alleged strength is merely a strength among the really weak. Indeed, all the fiat currencies in the table are down. No wonder, since the silly people in charge are on a race to the bottom. Even the last bastion among fiat currencies, the Swiss franc, has now completely lost it.

And if we go on by taking a look at the somewhat longer perspective, we see that all the major fiat currencies have had an absolutely terrible development. Check out this second table.

TABLE 2 – sorry but it has gone missing in action

Before the Nixon shock in 1971, gold was at USD35 / oz and only recently at USD1,900 / oz. That makes the dollar devaluation of over 98%. Makes you think they are in the same league as the Zimbabwean dollar, doesn’t it? Perhaps not yet, but one things is certain; those of us that use such kind of money as unit-of-account are in deep trouble. It’s definitely a lot harder to perform decent accounting, decent investment forecasts, decent investment evaluations, etc, using such poor unit-of-accounts.

The really clever people already use gold as a unit-of-account. We won’t name names, but we can assure you they are ahead of the fiat crowd and the gap is increasing.

Want to be one of those? Then start using gold as your preferred unit-of-account already today. It’s after all completely free.

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