Today King World News is featuring a piece by a man whose recently released masterpiece has been praised around the world, and also recognized as some of the most unique work in the gold market. Below is the latest exclusive KWN piece by Ronald-Peter Stoeferle of Incrementum AG out of Liechtenstein.
“If a good is to remain money, the public must not come to believe that a fast and unstoppable increase in its supply is to be expected.” — Ludwig von Mises
By Ronald-Peter Stoeferle, Incrementum AG Liechtenstein
August 31 (King World News) – The Illusion Of Nominal Value P. 2
The exchange value of gold and FIAT-money is not stable. It would change over time, depending on the growth in the supply of gold, the change in the demand to hold cash balances, and the growth in goods and services on the market. However, given its much lower as well as easily foreseeable annual supply growth rate, it would be far more stable than paper currencies.
Ludwig von Mises always argued that money is a good like any other. It differentiates itself by one important characteristic: Money is the generally accepted medium of exchange, because it is the most marketable good. According to Mises, money’s function as a medium of exchange is thus the central one, while its store of value and unit of account functions are merely subordinate functions (they are derived from, or implied by the central function). This also implies that a rising money supply must lower the exchange value of money.1
In 1913, the population of the US was 97 million. The monetary aggregate M3 at the time amounted to approx. USD 20 billion, i.e., USD 210 per capita. Currently the population of the US is 318.9 million, while the monetary aggregate M3 has increased to USD 17.8 trillion.2 This translates into a money stock of USD 55,817 per capita.
Many comparisons from everyday life show that gold is currently not valued at an excessively high level. While a “Mass” beer (one liter) at the Munich Oktoberfest in 1950 still cost a converted EUR 0.82, the price in 2014 stood between EUR 9.70 – EUR 10.10 (average EUR 9.90). Thus, the annual price inflation of beer amounts to 4.2% per year since 1950.3
If one measures the beer price in gold terms, then one received 97 litres of beer per ounce of gold in 2014. Historically the median is at 87 “Mass,” the “bear purchasing power” of gold is therefore currently quite high. The peak occurred in 1980, at 227 liters per ounce of gold. We believe it is easily possible that this level will be reach again. Beer-aficionados holding gold should therefore expect a rise in beer liquidity.
Conclusion:
Even though we know of countless deterrent examples that show that such aggressive money supply expansion ends with “too high” price inflation, this dangerous gamble is being tried yet again. Inflationary policy is always a desperate attempt to create artificial prosperity by means of the printing press, which, as any objective assessment shows, will never be sustainable. The perpetuation of zero interest rate policy suspends the market’s self-healing corrective forces and fosters the nurturing of new asset bubbles.
Following the technology and housing bubbles, we are once again right in the middle of another asset bubble. While the previous bubbles were focused on individual sectors or specific market segments, we are currently in the midst of an entirely different bubble dimension. Government bonds are at the center of the debt money system and represent the majority of the assets held by central banks and institutional investors. All available means will be exploited to prevent this bubble from bursting.
1 See: “Die wahre Lehre vom Geld”, Dr. Thorsten Polleit, Liberales Institut („The true science of money“) 2 Source: www.nowandfutures.com
3 A value that is probably closer to the actual change in CPI than official inflation statistics suggest.
***KWN has now released the extraordinary audio interview with Andrew Maguire, where he discusses the astonishing moves in the gold market by the bullion banks, why a global reset is imminent, and much more, and you can listen to it when it’s released by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: WARNING: This Global Collapse Will Be Unlike Anything In Recorded History CLICK HERE.
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