"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, September 13, 2012

Stock Market Rally nothing but Rampant Paper Asset Inflation

Well, the Fed wants the stock market higher in time for the election (it seems Mr. Bernanke wants to retain his position as head of the Fed) and they got it.

Take a look at the following charts of both the Dow and the S&P 500, each of which is setting at more than 4 1/2 year highs based on what???

Impressive rally isn't it considering it has all been orchestrated by Fed QE programs. The problem is revealed however when viewing the following charts.

Thirteen years ago, it took a bit more than 42 ounces of gold to buy the DOW. In the year 2007, when the DOW made a brand new all time high in nominal terms, it took half the amount of gold to buy that same Dow, namely a bit more than 20 ounces. Today, as the DOW is once again flirting with moving back towards the all time high in 2007, it takes an astonishing LESS THAN 8 OUNCES of GOLD to buy that same DOW!

Are you getting the point of all this? All that the elitist monetary masters are creating in their alchemy laboratories is a RAMPANT case of paper asset inflation of the stock market. Stocks are losing value against gold and have been so doing since 1999. The more QE the Fed wants to spit out, the further this ratio is going to collapse until at some point it will probably end up with 3-4 ounces of gold being able to purchase the DOW.

Another way of stating this is: Do not be hoodwinked by the claptrap coming from the mouth of the monetary elites at the FOMC that inflation is tame and that expectations are subdued. We are witnessing one of the single greatest instances of inflation in the stock market in our domestic history!


  1. The Dow-to-gold ratio chart is interesting. You can see a long-term trend prior to the mid-90's where the ratio was gradually rising. After the mid-90's it took off, then popped around 2001 and has been falling ever since. Now it has clearly overshot the trend on the downside. Following the trend through the bubble, it looks like it should be around 15-20 right now, but is only around 8. At some point the trend is going to have to re-assert itself.

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