In the latest affront to the individual, new data shows that gold has significantly outperformed the Dow Jones Industrial Average in real money terms over the past four decades.

In real money terms, the Dow Jones was valued at 20 ounces of gold near its last peak in 1971. After the Nixon Administration abruptly closed the gold window and dramatically devalued the US dollar,  investors were able to dramatically leverage the savings of average Americans. With the rebirth of fiat currency, debt creation was no longer limited by the boundaries of real money. The world witnessed the greatest period of asset appreciation in centuries with massive over-leveraging.

The Dow Jones has dropped from 40 ounces of gold to 10 ounces in a decade.

Massive fiscal deficits and persistent attempts to re-inflate asset prices by the Federal Reserve created the appearance of a plateau in the Dow Jones over the past decade. But in real money terms, wealth has evaporated over that same period. The Dow has fallen 75% in gold purchasing power since its peak. Expect further declines to come as the great American margin call drives more money out of financial markets. While debt can be multiplied with fiat currency, payments must still be made with the existing money supply.

More importantly, the average American citizen was duped for 3 decades into transferring all their wealth into equity. Those who trusted these assets to the pros have since seen their purchasing power evaporate. As long as Americans don’t learn the difference between nominal and real gains, a larger wealth transfer to investors is guaranteed. The old adage still holds: ‘Bulls and bears prosper; pigs get slaughtered.’

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice.  The content on the site shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas and information on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors, firms, or other entities affiliated with the author(s). The author(s) may or may not have a position in any entity or advertiser referenced on this site. Any action that you take as a result of information or content on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.