Too Much Money Chasing Too Few Goods

An interesting analysis:

Too Much Money Chasing Too Few Goods

By John Tamny Wednesday, August 1, 2007

A weakening dollar may seem like trouble, but exchange rates don’t tell the whole story.

Much ink has been spilled of late about the strength of foreign currencies versus the dollar, but in truth, many of the major currencies have been weakening too; just not as much as the dollar. The problem with measuring the paper concepts that are currencies against each other is that they can all move in tandem relative to the value of real things.

When we factor in the constant that is gold, a different story emerges. While gold has risen 145 percent in U.S. dollars since June of 2001, it has also risen 45 percent in Australian dollars, 52 percent in Euros, 65 percent in Canadian dollars, and 73 percent in British pounds. When H.C. Wainwright principals David Ranson and Penny Russell wrote in a recent Wall Street Journal op-ed of “another classic ‘run’ on paper currencies,” they were talking about the gold price of currencies.

- rest at www.american.com/archive/2007/august-0807/too-much-money-chasing-too-few-goods