Would You Recognize a Slow Motion Collapse If One Was Right In Front of You?

Mon, May 16, 2016 - 1:36pm

A Reserve Currency : Junk Currency Comparison.....

I reduced the full chart from it's full size (in today's RNP video) to about 30% to allow it to fit in here. The detail that matters most is still retained with adequate clarity.

It's the kind of analog which a computer, using for example Pearson's Ratio, would give a very low correlation. Looking at it by eye from experience I'd expect maybe not much more than a 15-25% correlation - eg Pearson's Correlation 0.25 score - if that. But when somebody familiar with market movement, and the character of market movement, particularly someone who knows the difference between impulsive and corrective price action, sees this for the first time they're more likely to say something like "How about that!".

In the green and red is the price of gold in Venezuelan Bolivars. In the shocking pink is the price of gold in US Dollars, which the leaders of society assure us is the strongest currency in the world. The World's Reserve Currency. Timescale is intentionally different between the two. One chart is monthly and the other quarterly, which is one bar of one for every three (months) of the other. If the loose correlation continues, the USD will (continue to) decline at 1/3rd the speed of the unfortunate Venezuelan currency.

The vertical price scale in both is logarithmic, or on a percentage scale. Therefore because normalization has been done, comparisons can be made with reference to either of the numbered price scales shown.

The unfolding Venezuelan economic disaster is considered a full on collapse, complete with food riots, street protests and so on. By looking at the gold chart we can see the US economy has been doing much the same at 1/3rd the speed, but USD is considered to the "the best house in a bad neighbourhood" or "the least bad nag in the stable" to use phrases oft repeated in current times.

But if USD continues to do the same as VEF - it's just a slower collapse. What a difference there is in sentiment between these two! How little real difference there is remains to be seen, as the coming three years to the next pivotal moment unfold.

argentus maximus


The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More of the author's work (mostly video) can be found here: RhythmNPrice.

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