Gold drifts marginally higher in quiet, post-inflation data trading
Charlie Munger warns the biggest inflationary bubble in world history is bursting

(USAGOLD – 9/14/2022) – Gold drifted marginally higher in quiet trading as investors began digesting the implications of yesterday’s inflation report. It is up $2 at $1705.50. Silver is up 14¢ at $19.56. If the Fed was hoping for a sign of future convergence between the interest and inflation rates, it didn’t get it from yesterday’s data. In fact, inflation might very well be headed in the opposite direction. In a thought-provoking interview posted on YouTube recently, Charlie Munger, the 98-year-old partner in Berkshire Hathaway, warned that the biggest inflationary bubble in world history is now bursting and explored some of the implications.

“There’s never been anything quite like what we’re doing now,” he says, “and we do know from what’s happened in other nations if you try and print too much money, it eventually causes terrible trouble. And we’re closer to terrible trouble than we’ve been in the past, but it may still be a long way off. I certainly hope so.… If you look at the Roman Republic, they inflated the currency steadily for hundreds of years. Eventually, the whole damn Roman Empire collapsed. So inflation it’s the biggest long range danger we have probably, apart from nuclear war. I think the safe assumption for an investor is that over the next hundred years, the currency is going to zero. That is my working hypothesis.”

Editor’s note: The historical trend, as shown in the charts below, suggests that Munger’s “working hypothesis” is justified. The dollar has declined sharply in purchasing power over the past two years. Since the founding of the Federal Reserve in 1913, it has lost 96.7% of its value and is now worth 3.3¢. Since 1971, the year the United States severed the dollar’s link to gold, it has lost 86.5% of its purchasing power and is now worth 13.5¢.

 Purchasing Power of the US Dollar
(% change from year ago, 2017-2022)
line chart showing the purchasing of the dollar 2017 to present

Purchasing Power of the US Dollar
(Indexed to 100, 1913-2022)

line chart showing the purchasing power of the US dollar 1914 to present

Purchasing Power of the US Dollar
(Indexed to 100, 1971-2022)
line chart showing the purchasing power of the dollar 1971-2022
Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics

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