[The following is an excerpt from the October issue of TDV released to subscribers today]
One of the biggest crimes against humanity is central banking and their constant devaluing of their currencies.
Some of the biggest names in history have identified central bank inflation correctly:
-“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” – John Maynard Keynes
-“Inflation is taxation without legislation.” – Milton Friedman
-“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” – Alan Greenspan
-“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” – Ernest Hemingway
Note how eloquently Ernest Hemingway described our world today.
But, Lysander Spooner said it best when he said, “In reality there is no such thing as an inflation of prices, relatively to gold. There is such a thing as a depreciated paper currency.”
And so, in this topsy-turvy world of centrally planned banking and printing of fiat currencies it is nearly impossible to gauge the real value of things.
However, as Spooner said above, one good way to gauge things over a longer time frame is to look at things in the price of gold. Luckily, PricedInGold.com, ran by a friend of ours here at The Dollar Vigilante, makes this easy. First, let’s look at the Dow Jones Industrial Average (DJIA) in fiat money terms.
DJIA 1985-Present
If you were to just look at that chart you would think, “Wow, what an amazing bull market!” But, you have to remember, this is in constantly devaluing dollars. Here is how the DJIA looks since 1985 when priced in gold (a much more stable currency).
DJIA-1985
All of a sudden things jive much more with reality. When priced in gold the Dow hit a major peak in 1999 and has been in a major bear market since with only a slight bounce since 2012. It should be noted that dividends should be taken into account but even adding them into the equation does not change the story much as this chart shows.
DIA-2002
The green line is the DJIA in fiat dollar terms, dividends included. And the blue line is priced in gold, dividends included.
So, let’s look at GDP in “inflation-adjusted dollars” versus GDP when priced in gold. Here is GDP as calculated in 2005 dollars using the Consumer Price Index (CPI) to adjust for inflation.
Historical GDP in 2005 Dollars The Dollar Vigilante
Again, to the amateur eye it looks like US GDP has been in a near century long bull market.
Not so much when you look at the GDP priced in gold.
US GDP since 1929 historical priced in gold The Dollar Vigilante
When priced in gold, US GDP hit a major peak in 2001 and has only had a slight recovery, similar to the recovery in 1975 before plunging more than 50% by 1980. But that is just a look at the stock market and GDP priced in gold. What does this mean for the average working man?
When looking at US wages since 1965, adjusted for inflation by the CPI, it isn’t terribly pretty. In general, wages in “real terms” are down over time albeit not by too much.
Wages Historical Adjusted For Inflation 1965-2015 The Dollar Vigilante
But the real story is looking at wages priced in gold.
Wages Historical Priced in Gold 1965-2015 The Dollar Vigilante
Notice how things have been downhill since 1971? 1971 was the year the gold backing was removed from the dollar and the working man has been getting stiffed by inflation ever since.
Maybe things aren’t going as well as the cheerleaders on CNBC seem to tell us!
[Editor’s Note: This is an excerpt from the 50 page newsletter issued to subscribers today which includes information on an option play to short the markets, three new gold stock recommendations by Ed Bugos, information on a new bitcoin ATM/Debit card and potential investment into the company and much more.  Subscribe here to gain access.]