Gold And The Misery Index

The comments below are an edited and abridged synopsis of an article by USAGold

Since the launch of the fiat money era in the early 1970s, economies have gone very wrong, and unemployment and inflation rates have skyrocketed. Campaigning in the late 1970s, then-presidential candidate Ronald Reagan added the two numbers together and famously named the result the Misery Index. Subsequently, the Misery Index became the bellwether for stagflation—the combination of economic stagnation and runaway inflation.

Gold And The Misery Index |  BullionBuzz | Nick's Top Six
Very upset and depressed woman before monitor with financial data graphs, showing economic depression and loss of earnings.

With stagflation concerns rising, the Misery Index has made a comeback. USAGold has built a chart showing changes in the index plotted against changes in the gold price. Though they had an inkling of the result, the uncanny long-term correlation between the two data sets took them by surprise.

The chart shows that gold is a runaway stagflation hedge. The Misery Index nearly doubled in the 10-year period between 1970 and 1980, but gold rose by more than fifteen times. There were instances during the decade when the year-over-year increases in the price of gold surpassed 80%, and in early 1980 it surpassed 175%.

In a sense, the US experience during the 1970s was the first of many runaway stagflationary breakdowns following the abandonment of the gold standard in 1971. Similar situations occurred elsewhere: Argentina (the late 1990s); the Asian Contagion (1997); Mexico (1986);  Zimbabwe (2018); and Venezuela (2013). Each time, as the Misery Index rose, citizen-investors who held gold preserved their assets as the crisis moved from one stage to the next. Today, gold, not the bolivar, is the preferred medium of exchange in some areas of Venezuela, where stagflation has given way to something even worse—hyperinflation.

Up for discussion: Top analysts warn of a repeat of the 1970s, perhaps even worse; contagion; the six keys to successful gold ownership; in Venezuela, flakes of gold serve as money; notable quotable; the fourth turning 2021 update; and final thoughts.

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