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Silver, Gold, the Argentina Peso, and Exponentially Increasing Prices
According to Wikipedia Argentina devalued their currency by a factor of 100 in 1970, by another 10,000 in 1983, by another 1,000 in 1985, and by another 10,000 in 1992. From Alan Greenspan in 1966: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”In summary the 1945 peso was devalued by 10 trillion to one between 1945 and 2015. Imagine what that did to the poor and to the saving of anyone who left that savings or retirement in pesos! The compounded average rate of increase in the number of pesos per dollar from 1945 to 2015 was about 55% per year, every year. The devaluation was worse than average between 1975 and 1995. Gold in 1945 pesos increased at a compounded average rate of 63% per year since 1945. (Store of value!)
Suppose your savings in Argentina pesos had been valued in gold. Take the peso to dollar exchange rate and multiply by the price of gold in dollars and we see the price of gold in 1945 pesos. THE POINT OF THIS IS: Argentina devalued their currency from 1950 onward and more aggressively in the 1970s, 1980s and 1990s. The difference between Argentina and the United States (and Japan, the EU, the UK, Australia etc.) is mostly a matter of degree. The US benefitted from the dollar’s “reserve currency” status plus the US military, but the devaluation process has been similar, though less devastating. In 1971 the US dollar bought approximately 0.03 ounces of gold. By 2015 the US dollar bought less than 0.001 ounces of gold – a devaluation of over 30 to one. More devaluation is coming. EXPONENTIAL INCREASES HAPPEN HERE:The global financial system is based on exponentially increasing debt, currency in circulation, and devaluations. Examples:
CONCLUSIONS:The Argentina peso was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.” The US dollar was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.” The rate of devaluation was substantially less in the US, but the basic concept and result were the same – higher prices. Since the US dollar is backed by “full faith and credit” and not by gold, oil, diamonds, or anything real, exponential increases (since 1971) in public and private debt, expenses, loans, currency in circulation, and prices for most items have been typical. Exponential increases are occasionally not managed or controlled and increases of 25% to 250% per year occur, as per the above examples. Such parabolic spikes usually correct in a nasty crash and people invested in those spiking “assets” typically lose money, whether it is the NASDAQ, Nikkei, gold, crude oil, or many others. Imagine the impact from a crash in the US dollar – it might happen. (Some suggest it is inevitable.) Pesos, dollars, yen, euros, pounds, and other fiat currencies will continue to be devalued since we live in a devaluing world. Backing the US dollar with the military will help, support from petro-dollars will help, “reserve currency” status will help, but the trend is the same – fiat currencies always devalue and gold, on average, holds value. Examine again the chart of gold prices in Argentina pesos for an extreme example. Do your own research, but in my opinion, gold and silver bottomed in 2015, the S&P 500 Index topped in 2015, and the next several years will see much higher gold and silver prices, and considerable trauma for stock prices. Interesting Reading: Clive Maund: Gold Market Update Bill Holter: You are Watching It Dave Kranzler: Global Economic System is Crashing King World News: Dire Warning to the World Gold Thrives, Paper Dies!Silver Thrives, Paper Dies!Gary ChristensonThe Deviant Investor
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The exchange rate between the Argentina Peso and the US dollar in January 1945 was 4.17 pesos to one dollar. Like the United States, Argentina created substantial price inflation – devaluation of their currency – in the 1950s – 1990s.
