Wednesday, July 31, 2013

Exponential Trend Failure of the Day

Click to enlarge.

Returning to the gold standard median (in blue) will not be allowed! We must malinvest exponentially again (in red)!

The post-war international gold-US dollar standard

Starting in the 1959-1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate thereby reducing US economic influence. This, along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led US President Richard Nixon to end the direct international convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock").


Malinvestment is a concept developed by the Austrian School of economic thought, that refers to investments of firms being badly allocated due to what they assert to be an artificially low cost of credit and an unsustainable increase in money supply, often blamed on a central bank.

Source Data:
St. Louis Fed: Custom Chart


Who Struck John said...

The part of that chart that I find interesting is 1978-1981. The rest looks like I would have guessed.

Stagflationary Mark said...

Who Struck John,

When I look at that chart, I can't help but notice all that volatility during the Great Moderation of the 80s and 90s.

Researchers at the US Federal Reserve and at the European Central Bank have rejected the 'good luck' explanation and attribute it mainly to improved monetary policies.

Using that same logic, at least we know who to blame now. It isn't bad luck apparently, lol. Sigh.