Dollar Down, But Still in Demand

Charles Payne
Posted: Aug 27, 2014 12:01 AM
Dollar Down, But Still in Demand

Are you one of those people that’s been spooked out of this rally because you don’t like the President’s policies or the Federal Reserve? Well, I don’t like them either, but I do enjoy eating, and I do want to send my kids to college. Also, I would like to travel the world one day.

Over this past weekend, I guarantee that a lot of people passed away. Sadly, all they left their heirs was a garage filled with two years’ worth of canned food and three years’ worth of bottled water… plus a few gold coins they paid $1,800 an ounce for. Those that passed away loved their children and grandchildren, and wanted to make sure that their offspring would survive a worst-case scenario. It was admirable, but most of us live in the matrix… the world where worthless money can buy you stuff. Still, how long will it be this way? I’m not sure, but for now, I want to make sure I can live the best life possible. I have a feeling that that’s the same goal of most Americans and the quandary for those that know history always repeats itself.

Let’s have an honest conversation about paper money, the Federal Reserve and the future. A lot of financial experts have been warning of doom because of money printing at the Fed. Riding high after the 2008-09 crash, they have been looking for the next leg lower. Would-be investors that listened have missed 11,000 Dow points and are down big on their gold purchases. The good news is that all will be forgiven as long as the market crashes one day, even if time and opportunity squandered could never be recaptured.

Superman to the Rescue

The biggest economic news yesterday was the selling of Action Comics #1 on eBay for $3.5 million. The comic book made its debut in June 1938 and only cost a dime at the time. Tangible assets, including comic books, have always been a great hedge against inflation. But why do we get inflation? The printing of paper money that doesn't have backing is the main driver of inflation. This is a lesson that’s been learned the hard way throughout history, including American history. In 1775, American colonies authorized the printing of the Continental. The currency was an unmitigated disaster and the worst-case textbook example of perils of printing money without any backing.

US ContinentalAmount PrintedNeed to Buy $1.00 Goods
1776$19 million$1.00
1778$31 million$6.00
1779$226 million$40.00

Eventually, the US redeemed the Continental at 1/100 its original value in the aftermath a new term was coined to underscore when something was valueless or unbelievable: “Not worth a Continental.” This chart isn’t the old Continential… it’s the current US dollar which has lost 96% of its original value.

There are more and more calls going back on the gold standard to add validity and real value to the US dollar. I know the dollar is doomed, but the real, real deal is that right now, I prefer having a pocket filled with them. So, here’s the conundrum, should people wait for the worst-case scenario and only buy gold and silver, as well as former missile silos converted into condominiums? Here’s the irony: people that sell gold and silver and missile silo homes accept payment in worthless paper money, so what’s the right approach?

Last night, I spoke to Steve Forbes about this on my show, Making Money with Charles Payne. You can watch the clip here: