Gold To Dow Ratio

November 21, 2008

Furthering the discussion of the Gold to Dow ratio, the author stated that the ratio of one Gold ounce to one DOW average, which peaked at over 40:1 recently, may go to a fraction to 1 or as low as .03:1 or a price of gold over $50K/ounce, possibly as high as $500K/oz. The historic chart rolling back over 100 years shows several ratios approaching 2:1 and then 1:1 27+ years ago. Were the ratio to fractionalize to any number under 1:1 would be a very large spike in the ratio that would clearly standout on the historic chart, even more than the ratio during the Great Depression.

The chart does not compel history to repeat itself; human greed and mismanagement, however, will. The economic forces at work to compel this historic repeat of a low Gold v. Dow ratio may require a dollar revaluation such that several or more zero's be removed from the dollar to contain the reasonableness of the dollar gold price. Any viable economist might expect such an act to be fruitful to contain an inflating currency before such anomalies were to take place. As a predictive trend, as the Gold v Dow ratio begins journey below 1:1 such as .5:1, we might expect this revaluation of the dollar to occur.

What was not clear in earlier posts regarding the above ratio was whether the Dow would fall to meet a low gold price; or, whether gold would rise to meet a higher DOW. Now it appears that the DOW is falling towards gold, as gold seems held hostage by the Dollar faction (Fed and its anti-gold banking agents who appear to either have naked shorted the COMEX gold market or who are actually selling US gold -- who knows with such a lack of transparency, calling for a US inventory of its gold reserves). As stated earlier, the line in the sand on the dollar faction's hold on gold appears to be at or around 1,000 current-style dollars. Should this line be breached, it was felt, the price of gold is likely to explode like a soccer ball held too far under water that it could no longer be contained. It is this explosive move that the dollar faction is trying to contain at all costs of reasonable moral behavior -- a criminal act because it is made beyond the reach of Congress and the American people under the guise of sovereign immunity of those participating in the decision.

Yet, as the DOW continues its slide towards gold, the hold on gold will (at some point) fail and gold will explode. Not only will it rise sharply, it will fractionalize the historic Gold v Dow ratio. As it does so, it is the author's opinion that this will cause a great desire on part of the dollar faction to revalue the dollar by lopping zero's from the dollars gold value. As such the Gold v Dow ratio may return to a more normal 1:1 or higher ratio again. Thus history would show a more normal trend increase in the ratio than to show an outlandish anomaly in which the ratio went to .03:1. So as gold gathers momentum to rise beyond $10K/oz, the desire of those in charge of such matters, would simply start lopping zero's to contain the ratio to a more normalized number. It isn't that these dollar faction participants are looking to keep a pretty chart, rather, the pressures that would have been released by gold breaching the line-in-sand number of $1,000/oz, will have created other events that will make their desire to lop zero's.

It is very difficult to understand why the dollar faction appears to be risking international exposure into their scheme that Bill Murphy and GATA have long attempted to bring mainstream, but it seems that the divergence of COMEX paper gold from physical gold sales is making their job much easier. The dollar faction's control on Paper gold is becoming increasingly apparently ridiculous. It will not play well on Main street, who is currently being fleeced of its savings in homes and 401K's and IRA's. Such a silly act of control speaks volumes into the larger and more desperate exposure of arrogance of control of all-things-financial by the dollar faction. What may have started as a good idea has now became "dollar gone wild."

The notion that the dollar faction should attempt to Centralize Control aka communism all-things-financial, would roll Mr. Reagan over in his grave. The dollar faction control on gold vis-à-vis the COMEX paper gold markets is but the worst symptom of arrogance now manifesting itself in daily news reports on Bloomberg and CNBC. When the book is written that analyzes what changes should be made to the Constitution to jump start a better America, it will recommend that sovereign immunity be tossed out with the baby's bath water. Arrogance can only come from the inability of common man's inability to expose and stop such acts of official arrogance. When Congress appears bought and paid for by the banking lobby, there is no one guarding the American purse. American's once trusted their banks and official US financial bodies and Congress, but no longer. What was thought to be a wacky conspiracy theory about the FED and its power over gold are now becoming mainstream. As the Gold v. Dow ratio approaches below 1:1, dollar faction credibility will be increasingly harmed.

Sad it is when lies and slight of hand follow Greenspeak, the art of unclear thought, in official all-things-financial. The Greanspeak lack of transparency and guesswork of the dollar faction actions regarding financial responsibilities leaves all of us scratching our heads as to who the heck is in charge and what were they thinking? Why have they created a dollar-based-debt that can not exist in the same universe with gold? We have Nixon (among other things) to thank for that. When he took the US out of the London Gold Pool (the one that tied the dollar to gold after WWII), in 1971, his lies about Watergate would soon become further lies by his successors about all-things-dollar. It created a house of cards out of the dollar in which further lies and manipulations became necessary such that today, should gold rise above $1,000/oz, something very bad is likely to happen with the dollar (zero lopping anyone).

As Gomer Pyle (TV character) often said, Shame, shame, shame. Yes, shame on those we trusted to protect our dollar and who now appear to be destroying it. Nixon institutionalized the official lie (although there are those that would say some guy in the 1930's might have done that better) and further administrations have refined it such that it pervades all levels of government. Bad decisions became institutionalized and are being protected with more lies. The indiscretions of Presidents now appear to be the tip of the iceberg of lower level indiscretions including the dollar faction fascination with keep gold down, despite strong market forces to the contrary. The notion that since they can control gold, so they should. The moral compass is spinning drowned in alcohol.

The historic chart of Gold v Dow ratio may not speak the volumes per above, but it will show our grand children and our grand nephews and nieces how well the dollar did as a measure of value during the last 150 years.

Seventy-five percent of all gold in circulation has been extracted since 1910