The big lie of fiat currency is upheld by many others.
We’re told that the Federal Reserve can juggle growth, employment, inflation and stability – by simply fixing the price of money. Money itself is already an abstraction. There’s no real-world constraint on money creation, so of course, the Fed can also control how much and when to create it.
The price, being interest rates, is set by Federal Reserve governors who consult their spreadsheets and abacuses to decide what the price should be. It’s kind of an amazing con. How the hell do they know what the price of anything should be – let alone the price of everything?
There’s not even an argument that they’re fixing the price.
Any garden variety economist will tell you that price fixing is a fool’s errand. It doesn’t work because no one has perfect information and only a dynamic market of individual buyers and sellers can balance supply with demand. Price is a signal, not a lever.
But when it comes to the unit of account itself? Apparently yes, the Fed has cracked the code. It’s nothing but hubris, or perhaps just pure gall.
Part of this whole fiction is a focus on GDP growth as a metric of progress. But GDP is little more than a measure of how much the economy is impacted by monetary policy.
One major tell: if you divide the S&P 500 index by the Fed’s balance sheet since the 2008 Great Financial Crisis, you get a flat line:
This chart means we don’t have a growing stock market, we have a stock market impacted directly by inflation, or more accurately: propped up by phoney baloney Fed helicopter money.
GDP is up, but real growth is shockingly flat over the past 20 years.
That’s because GDP is measured by currency units in circulation. Increase the number of currency units and GDP goes up.
Repeat the lie enough times and GDP=growth=prosperity in the minds of everyday people.
For most investors, you simply can not put forth a compelling argument against: “Number go up!”
So, here’s what you can expect for the dollar and GDP:
Number will go up.
Inflation will soar (though of course official numbers will be muted) along with GDP.
Rising GDP will be a “win” even as it makes the average dollar holder poorer.
And gold will be the last asset monetary asset standing.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
