NIA has just posted today's #1 most important economic chart of the Federal Funds Rate-YOY U.S. Price Inflation (Real Interest Rates) vs. Gold/U.S. M2 Money Supply Per Capita vs. U.S. Corporate Equities/U.S. Gross Domestic Product.
Current U.S. price inflation of 6.24% greatly exceeds the Federal Funds Rate of 0.08%. Since leaving the gold standard, this equals a new all-time record negative Real Federal Funds Rate of -6.16%. The current price of gold of $1,865 per oz is equal to 2.93% of U.S. M2 Money Supply Per Capita, which is slightly below the median ratio of Gold/U.S. M2 Money Supply Per Capita since 1968 of 2.96%.
The second most negative Real Federal Funds Rate was set in 1975 at -4.96%. At that time, the price of gold was trading for 4.37% of U.S. M2 Money Supply Per Capita. Today, with U.S. M2 Money Supply Per Capita of $63,635, Gold/U.S. M2 Money Supply Per Capita of 4.37% would value gold at $2,780.85 per oz.
The third most negative Real Federal Funds Rate was set in 1980 at -4.79%. At that time, the price of gold was trading for 10.29% of U.S. M2 Money Supply Per Capita. Today, with U.S. M2 Money Supply Per Capita of $63,635, Gold/U.S. M2 Money Supply Per Capita of 10.29% would value gold at $6,548.04 per oz.
The fourth most negative Real Federal Funds Rate was set in 2011 at -3.73%. At that time, the price of gold was trading for 5.83% of U.S. M2 Money Supply Per Capita. Today, with U.S. M2 Money Supply Per Capita of $63,635, Gold/U.S. M2 Money Supply Per Capita of 5.83% would value gold at $3,709.92 per oz.
The fifth most negative Real Federal Funds Rate was set in 2008 at -3.49%. At that time, the price of gold was trading for 3.81% of U.S. M2 Money Supply Per Capita. Today, with U.S. M2 Money Supply Per Capita of $63,635, Gold/U.S. M2 Money Supply Per Capita of 3.81% would value gold at $2,424.49 per oz.
The average ratio of Gold/U.S. M2 Money Supply Per Capita from 1975, 1980, 2008, and 2011 when the Real Federal Funds Rate previously became severely negative like it is today was 6.075%, which would currently give gold a fair value of $3,865.83 per oz.
The primary reason for gold trading far below its current fair value of $3,865.83 per oz is the largest stock market bubble in history due to Federal Reserve Chairman Jerome Powell putting his personal job security over the health of the U.S. economy. By continuing to hold the Federal Funds Rate at only 0.08% even as U.S. price inflation spirals out of control and many global central banks begin to hike rates, U.S. Corporate Equities have become the largest bubble in world history reaching a new record high equal to 213.23% of U.S. Gross Domestic Product.
In 1975, 1980, 2008, and 2011 when the Real Federal Funds Rate previously became severely negative like today, U.S. Corporate Equities/U.S. Gross Domestic Product was only 34.86%, 34.30%, 88.86%, and 86.11%, respectively!
Soon, the Federal Reserve will be forced to admit that U.S. price inflation is not transitory and it will begin to rapidly hike the Federal Funds Rate in a desperate attempt to prevent hyperinflation. Although nominal stock market values may not crash by 90%, stock market values will crash by 90% when priced in gold.
Preparing Americans for Hyperinflation
