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Gold has Beaten All Currencies in History (and Lately)
The anti-gold crowd is cackling mightily over gold’s recent decline, but wide price swings are part of the nature of any commodity market. Meanwhile, gold is fulfilling its major role – as a currency alternative – with its consistent strength over the last 10 years, 50 years or any number of centuries you care to name.
Since 2000, gold has beaten all stock markets and all currencies. You can’t ask for better performance than that. In the last 50 years, stock markets have performed better than gold, but that is a misleading comparison. Gold should not be compared with any stock market alternative, but with cash alternatives.
Gold is up 133% to 88,584% in Paper Terms Since 2000
An intrepid investigator, James Anderson, has researched what gold cost in terms of 120 currencies over the last 14 years. His research shows that gold has beaten all paper currencies by at least 133%, with gains ranging up to nearly 90,000%. Using gold’s price as on January 1, 2000 vs. a depressed London price of $1,205 on New Year’s Day of 2014, Anderson chronicled gold’s gain in each of these 120 currencies.
The best currencies of the new Millennium were those in the Czech Republic and Switzerland, but they lost 57% of their value to gold in those 14 years. Here is a list of the 10 best currencies of the new century – the All-Star Paper of the new Millennia – vs. gold’s performance in terms of those top-10 currencies.
The U.S. dollar was comparatively weak vs. these currencies since 2000.
Gold gained 319% in terms of the U.S. dollar during the same 14 years. The worst currencies saw gold gains of 30,000% or more: 88,584% for the Congolese franc, 65,789% for the Burmese kyat and 33,787% for the Liberian dollar.
The Congolese franc is pretty weak, but it does not take the Gold Medal (interesting term, there) for the worst currency of the last decade. In 2008-09, we saw a classic case of currency hyper-inflation in Zimbabwe, where their bank notes reached $100 trillion in early 2009. Zimbabwe’s national money supply totaled 10 to the 25th power (that’s a “1″ with 25 zeroes following it) of “dollars” in early 2009.
When Zimbabwe became independent in 1980, the Zimbabwe dollar was worth $1.25, but the new ruler Robert Mugabe began confiscating land, disrupting Zimbabwe’s food supply. Inflation began slowly, then snowballed to 11,250,000% in the June, 2008. After that, inflation figures were not published. Professor Steve Hanke, a currency expert, estimated an annual inflation rate of 90 sextillion percent (“9″ followed by 22 zeroes) in November, 2008, when prices were doubling every day. In February, 2009, Zimbabwe installed a new currency (for the fourth time), at a ratio of one trillion old dollars for one new dollar. By April 12, 2009, that scheme failed and Zimbabwe began to deal only in more reliable foreign currencies.
The Worst Hyper-Inflations of the 20th Century Followed the Two World Wars
Wars are the customary culprit in currency devaluation. Even in the strongest countries, inflation rates surge during and after major wars. In weaker lands, or those on the losing end of major wars, inflation can destroy currencies. The two most famous examples are Germany after World War I and Hungary after World War II. These are two established nations, once on top of the world, brought low by war.
The pre-World War I German Mark traded at four to the U.S. dollar. Due to punishments levied on Germany after the war, Germany began printing bank notes to pay for crippling war reparations. By late 1923, Germany’s Weimar Republic was issuing banknotes of two trillion Marks and postage stamps of 50 billion Marks. Then, prices started doubling every day, a sign of the terminal destruction of a currency. The highest banknote issued by Germany was 100 trillion Marks. The printer that produced that batch of notes submitted an invoice to the Reichsbank for precisely 32,776,899,763,734,490,417.05 Marks.
The major fallout of hyper-inflation is that national bonds become worthless. Retired Germans could not live on their pensions. Food and other essentials were out of reach in terms of rapidly-rising prices. Workers or pensioners had to cash a check and buy essentials immediately, since prices rose by the hour. (All the stories of wheelbarrow money are fairly silly, since adding “000,000″ to banknotes made a wheelbarrow unnecessary. Unlike gold, paper isn’t valued by weight but by its shifting decimal point.)
As bad as Germany’s 1923 hyper-inflation was, it does not hold the record for highest-denomination national bank notes. The largest banknote ever printed by an official government was the 100 quintillion Hungarian pengo note (“1″ followed by 20 zeroes: 100,000,000,000,000,000,000) in 1946. Hungary even upped the ante one more time, to a one sextillion (21 zeroes) note, which was printed but never circulated. The peak monthly inflation rate was 42 quadrillion percent (42 plus 15 zeroes) in July, 1946. In practical terms, that means that prices double every 15 hours. One reason George Soros is now a gold bug is that he lived in Hungary then, trading on the black market as a teenager before migrating to London in 1947.
The world’s strongest continually-existing currency of the last century has been the U.S. dollar, but in the 100 years since the founding of the U.S. Federal Reserve, the dollar has lost over 98%, in terms of gold. Gold was officially pegged at $20.67 per ounce in 1913 (through 1933). Even at today’s depressed price of $1,240, gold has risen 60-fold vs. the 1913 dollar. And the dollar has been the world’s best currency since 1913. Most of the other currencies that existed in 1913 have long since been totally destroyed.
The U.S. dollar has been the reserve currency of the world for 70 years, ever since the Bretton Woods conference in New Hampshire in 1944 decided that the dollar and gold would rebuild the postwar world. Even then, gold has beaten the 1944 dollar by 35-fold, rising from $35 per ounce up to $1,240 today.
The world’s strongest currency over the last 40 years has been the Swiss franc, but gold has also beaten the Swiss franc by a large margin. The Swiss franc was priced at $0.23 in 1971, when the dollar was set free from gold and the world’s currencies began to “float” against each other. The Swiss franc recently traded at $1.10 for a five-fold rise since 1971, but the price of gold in terms of Swiss francs has risen from 150 francs in 1971 to 1125 recently, a gain of 650%. Gold has beaten even the best of global currencies.
That’s why we at Navellier Gold recommend that investors accumulate the yellow metal as their currency alternative. You don’t need to sell stocks to buy gold. Trade in low-yielding bank CDs, money market funds and even some low-yield bond funds to diversify into the world’s proven currency of last resort.
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