Searching for money’s new standard

BloombergOpinion/John Authers

graphic image of a book and reading glasses A Good Weekend Read“The financial history of the past 50 years is in many ways the story of a series of attempts to find a different anchor to replace gold as the mechanism of control. Each new regime has been greeted with a change in the trend of the price of stocks in gold terms.”

USAGOLD note:  Authers guides us on a walk down memory lane wherein five different Federal Reserve policy regimes were introduced to replace the gold standard. Each eventually created volatility in financial markets that brought about their demise and the introduction of a new standard. Now, says Authers, the Fed has deployed the “QE standard, or a refusal to let bond yields rise,” which is workable until inflation kicks in. Then it will seek still another replacement. In each case, those regimes’ apex coincided with an overvaluation of stocks to gold, as shown in the chart below.

S&P 500 to Gold Ratio
(1927 to present, log scale)

line chart showing the S&P 500 to gold ratio 1927 to present
Chart courtesy of • • • Click to enlarge

Repost from 2-14-2021

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