U.S. Money Supply Tops $20 Trillion ... Got Gold?


There in the upper right panel it officially is: the U.S. Money Supply ("M2") this past week topped the $20 Trillion level, data courtesy of the Federal Reserve Bank of St. Louis as retrieved from the System's Board of Governors.

Let's have a brief comparative play with the numbers. You'll recall back in the year 1980 Gold's having overly spiked from December 79's low of 433 to 873 in January of '80, a price increase of 102% in just 29 trading days. It then quite rightly all unwound such that in due course, the average price of Gold for the entirety of the following year 1981 was a more settled 467; the average level of the U.S. Money Supply that year was $1.8 Trillion.

Today with the money supply at $20 Trillion, and implementing your cross-multiplication skills acquired when learning proportional math: "as $1.8T is to Gold 467, so is $20T to ... (wait for it) ... Gold 5189!"

But that's cheating a bit, for the supply of Gold too has increased, roughly doubling since those days. So halve Gold 5189 and we get Gold 2594. Except that the supply increase in Dollars has been far more accelerative than has the supply of Gold. The bottom line is, (in sparing you the non-linear math), the Gold price as shown in the above Scoreboard is valued at 3767. And again in that upper right panel of "M2", Gold's modern-day tendency is to catch up to that green line of the money supply. Oh my. Got Gold? (GLD)

To be sure, the calculation varies based upon from when historically one begins. We can mathematically make a case for Gold today being worth only about 1000; then in looking to the 3Ds of Debasement, Debt and Derivatives, there are those who make the case for Gold being worth 10000, even our "ole pal Al" (Edwards) at one time up there at 50000. But we'll stick with the conservative, mathematically logical 3767 level, especially given its tendency to track the growth of "M2" such when they again meet, we'll simply say: "There 'tis, ... again."

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