From GFY's Resident Economist, me...
First things first. Here is the chart for MZM (Money Zero Maturity) aka The Stock of Money. This is the measure of the liquid money supply within an economy. MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. This chart is from 1/1/2000 to the present. I got the statistics from Economagic.com.
As you can see, the Federal Reserve has been increasing the money supply at an incredible rate over the last 3 years. This makes each dollar worth less and less over time. That is why it costs more and more dollars to buy other currencies, like the Euro. This is also why the price of commodities like Gold are being bid up. Relative to a fiat currency like the dollar, there is a fixed amont of gold. Another reason gold is being bid up is that gold is traditionally a hedge against inflation, and when the government starts printing dollars like there's no tomorrow, inflation follows.
So what's the future of the dollar? A general trend downward in value until such time as the government stops creating new money out of thin air.
First things first. Here is the chart for MZM (Money Zero Maturity) aka The Stock of Money. This is the measure of the liquid money supply within an economy. MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. This chart is from 1/1/2000 to the present. I got the statistics from Economagic.com.
As you can see, the Federal Reserve has been increasing the money supply at an incredible rate over the last 3 years. This makes each dollar worth less and less over time. That is why it costs more and more dollars to buy other currencies, like the Euro. This is also why the price of commodities like Gold are being bid up. Relative to a fiat currency like the dollar, there is a fixed amont of gold. Another reason gold is being bid up is that gold is traditionally a hedge against inflation, and when the government starts printing dollars like there's no tomorrow, inflation follows.
So what's the future of the dollar? A general trend downward in value until such time as the government stops creating new money out of thin air.
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