(continued from part 3) …
Of course, as Bob laments in his song, The Times They Are A-Changing, but not to anything we haven’t seen before, even in our short lifetime.
11.So if the U.S. dollar is under threat then imagine what things are looking like for the Canadian dollar. Anything denominated in dollars would be at risk if the dollar declines as a store of value, and derivatives of the US dollar like the C$ or the A$ are valued as a subset of the U.S.$ so we get hit even harder.
Folks on fixed or inelastic incomes get wiped out when the currency in which their incomes are denominated are wiped out. Look what happened in Wiemar Germany and the hyperinflation there, or Argentina under Peron, just to name a couple.
What we see below is a chart of world currencies against the U.S. $.
12. Toronto-Dominion Bank’s TD Securities have told clients that the CAD could be in for yet more declines and only in mid-2016 will we likely see the tide finally turn in favour of the currency. At the time of publication of TD Securities report the CAD is weak following another dire economic growth reading.
“Still no growth in Canada this year, disheartening news that leaves the loonie poised to make a run at fresh decade-plus lows. Canada’s economy unexpectedly contracted 0.2 percent in May versus forecasts of a flat reading,” notes Joe Manimbo, referencing the underlying woes behind CAD under-performance.
We have to stop thinking in ways that use the fiat concept of “dollar” as a measure of value. I had a discussion not too long ago with a customer who did not appear to able to make the leap to a “dollar” as only a denomination of buying power rather than having actual intrinsic value.
If one can make that mental jump then its probably time to look for stores of “real” value rather than keeping resources in any dollar denominated security or cash. Real property and “real” assets tend to preserve value and if one can separate one’s mental connection of “dollar” to “value” it becomes a lot easier to make decisions about stores of value where “value” is defined by “buying power”, or a “production capacity”.
A “real property” store of value looks like this little farm building here, and what makes a store of value is that you can use it to make money, whatever that money happens to be, Dollars, Pounds, Fancy Sea Shells, Cigarettes, Beaver Pelts, or whatever society decides. Homes can be a store of value but they have other factors affecting them and you can’t really use them to make money unless you are buying and selling homes as a product or service.
Real “buying power” looks like the 9999 silver coin in the image, or perhaps something like the gold coin in the other image. Or it could be gold wafers like the Valcambi wafers or just any item which society accepts in exchange for products or commodities.
In 1965 my dad comfortably supported a family of five with a single family home and a car and few wants. We weren’t rich but we never really went hungry or without warm clothes or shoes or any of the other “poor folks” stories popular in the media. He earned about $10,000.00 a year as a teletype technician with the Canadian Pacific Railroad.
Then on August 11th, 1971 Richard Milhous Nixon repudiated Bretton Woods and the gold standard. At the time gold was trading at about $35.00 U.S. for an ounce of gold. I was enjoying my first year away from home in the Navy. I phoned my dad and begged him to put everything he could into gold. He told me I was nuts, and anyway, he didn’t have much extra to put into gold so he passed. And the rest, as they say, is history. My dad chose to believe the promises of politicians. He chose wrong. He was a product of his generation and he still trusted his leaders. And, what about the politicians promises that devaluing the dollar would magically improve our competitive position?
During the past 44 years, the dollar has fallen in value by more than 70% against the euro/German mark and the Japanese yen. The U.S. had a modest net export surplus in 1971 before Nixon started the dollar on its downward path. Today, that deficit is over $400 billion and growing quickly. What will happen if the dollar slips out of use as the de-facto world currency?
Finally, the dollar has done anything but keep its value. Today, the dollar is worth less than two dimes (17 cents last I checked) in buying power compared to the pre-Nixon dollar. The dollar now has only about 5 cents of buying power compared to my grandfather’s dollar. And, just 5 minutes ago the C$ spot price of gold was $1432.93 per Oz.
We are a long way from $35/Oz gold aren’t we? I sometimes wonder what my dad would say now. As the previous chart showed, the rest of the world currencies are declining against the US dollar and as this chart shows the US dollar is steadily going down. Fiat money always fails in the end.
With little reason to believe that the dollar will maintain even this paltry value, the average North American family is left with no meaningful way to save for their children’s education or their own retirement. We experience all of this in the form of financial insecurity and well-grounded anxiety about the future.
So how ya doin’ Alberta? Where is your real value kept? What are the socialist tea leaves tellin’ ya Rachel? With oil in the toilet, the dollar blowing away, no relief in sight and all your little vampire children coming home for dinner, whatcha gonna do? I am reminded of the little song “Bad Boys, Bad Boys, ” by Bob Marley. Its time for the closeted deviants of the new socialist ruling class to step out of the closet and into the light. Its time to lead, Rachel. We need more than re-arranging the deck chairs on the Titanic while the band plays on.
It is not popular with most folks these days, but it has never been more obvious that without God as our foundation, our Rock, there is nothing secure in the secular. And there is nothing new under the sun. There is a bad storm coming, soon.