Now, for the real proof the economy is already in a Depression.
Back in the 1930s — and all the way through 1971 — the U.S. monetary system was on a gold standard. In 1933, for instance, $1 of GDP was equal to 1/35 of an ounce of gold.
In 1971, it was equal to about 1/42 of an ounce of gold. Then, Richard Nixon severed the link between the dollar and gold once and for all.
Don’t get me wrong. I do not advocate a gold standard. Never have, never will. But you simply must understand that **just because the world is no longer functioning on a gold standard — doesn’t mean you cannot — or should not measure values in terms of gold. **
As a matter of fact, you should. Measuring values in terms of an asset that represents the real value of money is the only real way to measure anything today. That’s even truer these days than ever before because paper currencies are so fickle and volatile in nature.
So now, let’s take a look at our country’s GDP in terms of the amount of gold it can buy.
And let’s do a simple comparison of 1932, the depths of the Great Depression … with 1971, just before the gold standard was abolished … the year 2000, the peak of the tech bubble … the year 2007, the real estate peak … and the latest GDP data.
Let’s see what’s really happening — in terms of how much gold the country’s GDP can purchase at those different points in time.
Here’s the summary, and a chart to go along with it …
In 1932, our country’s GDP was worth 2.8 billion ounces of gold.
In 1971, it was worth 27.74 billion ounces of gold. Put another way, our country’s GDP was almost ten times what it was in 1932.
In 2000, our country’s GDP would purchase 34.54 billion ounces of gold.
At year-end 2007, it was worth only 16.87 billion ounces of gold.
As of March 31, 2010, our country’s GDP would purchase a mere 13.08 billion ounces of gold.
That’s a 22.47% decline in three years, since the peak of the housing bubble … and a whopping 62.13% decline since the end of the year 2000.
If that’s not a contraction, if that’s not a depression in real terms,
I don’t know what is.
Of course, almost everyone will argue with me about the above analysis, their main objection being: I’m just viewing the economy in terms of gold, and that the contraction I speak of is merely because the price of gold has gone through the roof.
But I ask you the following questions, and I’ll let you answer them …
If gold isn’t real money, then what is? Paper money?
If so, then why does paper money — in almost all cases — buy you less than it did a couple of years ago … five years ago … ten years ago … fifty years ago?
Why does a barrel of oil cost nearly eight times more than it did just ten years ago, when in gold terms, the price of oil is the same?
For the economy’s current GDP to equal the same gold purchasing power it had in the year 2000 — 34.54 billion ounces of gold — the price of gold would have to plummet by more than 64.5%.
What are the chances that’s going to happen, when the Federal Reserve recently stated it would print as much as $5 trillion more in funny money to try and turn the economy around, by papering over the mess?
Folks, the U.S. economy is already in a depression. Deep in a depression. And as I said at the outset, almost no one realizes it.
Hopefully, you do. And hopefully, you’re taking the steps necessary to protect your wealth, so that it does not suffer the same devastating losses in real terms.
And further, so that you have a solid plan to profit from what almost no one else recognizes.