Thursday, 2 February 2012

Deflationary Depression?

Not us - we just want to devalue... and go!

So... what does this chart say to YOU???

Pay careful attention to the divergence between the
"Euro PHLX" line and the "Gold (EOD)" line,
from the start of 2009 on (just for one example)

Plus also the remarkable general correlation between the Gold, Brent crude, CRB and Euro lines —aside from those times when the Gold line markedly diverges from the trend of all the others, only to see them follow the direction of gold after a brief period of adjustment to a new reality.

It almost looks like someone is adjusting the relative value of gold in terms of euros (and therefore by extention in terms of dollars as well), and this revaluation of gold is then guiding a revaluation of all other commodities, starting with oil (which is a significant input cost factored into all other commerce).

Do you think it is possible there could be a tighter relationship between the value of oil and gold, than between oil and currencies? And that gold is used to devalue currencies, thereby avoiding a sustained deflation. Which is what causes a fall into, and inability to escape from, a Depression.

Interesting, no?

And here is something else that is interesting, if you are looking for additional homework credit while looking at the data in the graph for yourself (a link to the interactive version of this graph is provided in a comment below BTW). Not only can you see evidence that gold is being used to devalue currencies against the golden reference point of value when general commodity prices are falling, but there is also evidence to support the case gold is being use to up-value currencies during times of runaway inflation too. Pretty neat, huh?

Marked-to-Market gold at the ECB, in action!

Gold prices the dollar euro, and the dollar euro prices everything else.


DP said...

Charts R Easy

DP said...

Gold prices the dollar, the dollar prices everything else.

Except the euro - which prices gold.

DP said...

Who's The Daddy?

DP said...

"Marked-to-Market gold at the ECB, in action!"

You won't find that at the Fed.

Peter Griffin said...

"Marked-to-Market gold at the ECB, in action!"
You won't find that at the Fed

Motley Fool said...

Hum. Let me rephrase this in a simpler form. 

With these type of graphs one looks for patterns and see if cause and effect exists. If one sees such a pattern, such as gold leading upward moves, where after the rest excepting gold declines, as in the graph above, one may speculate explain the meaning and speculate as to the reasons.

DP has pointed out that a meaning is that gold is being revalued against the euro. He has speculated that it may have been done intentionally. And. He has not provided a possible reason for this happening. 

DP said...

Great comment, thanks for stopping by and sharing a little of the love, Motley ;-)

DP said...

Here is another view of the same thing, but looked at from the other side of the same (euro) coin.

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