Real Money Terms

Real output is already very cheap in gold terms. Instead, the most likely correction will take place in the stock market itself, either because the dollar sinks or because stocks sink…or both.

Source: Getty Images

Thursday, March 19th, 2026

Bill Bonner, from Youghal, Ireland

So far, this century has been good to us.

Today, we raise our heads slightly, out of the Maximum Safety foxhole, to see if things have changed.

Since 1999, the dollar’s purchasing power has been roughly cut in half. But in our preferred money — gold — everything has gotten cheaper.

What are the two big ticket expenses that most people face? A house and a car.

In dollar terms a house is more than twice as expensive today as it was at the end of 1999. But in terms of gold, the price went from about 750 ounces to just 80, a 90% price reduction.

Meanwhile, the Ford F-150 went from about $21,000 in 1999 to around $30,000 for the stripped down, basic model today. In gold it went from 75 ounces to around 6 ounces today...again, a 90% price reduction.

Of course, this could be a major fluke, never to be repeated. Or it could represent something much more important. It could, imperfectly, clock the slippage of the US empire. In very round numbers, total US output in 1999 was about $10 trillion.

Now, it’s $30 trillion. Measured in gold, it was worth 36 billion ounces of gold at the turn of the century, but only six billion today....about an 83% drop. In terms of real money, US output is just not worth as much as it used to be.

What that means, exactly, we don’t know either. These things are relative, not absolute. Other nations have suffered similar declines against gold. And it seems unlikely that real output could continue to go down – in real money terms – so dramatically.

The story appears to be similar for capital assets (stocks). The Dow began this century around 10,000. If you’d gotten in and stayed in, you would have multiplied your money by about 4.7 times.

Not bad, of course.

In gold terms, you could have purchased the Dow stocks for 36 ounces of gold in 1999. Today, 36 ounces would get you four Dows. In real money, the flower of American capitalism has faded so much that it is only worth about a quarter of what it was worth 25 years ago — a 75% loss.

Will that continue?

Possibly. In terms of gold, stocks alternate from being very cheap (1980) to being very expensive (1999). Since 1999, they have been going down. But they still have not become very cheap. Our guess is that it will happen. But not by gold becoming more expensive, because real output is already very cheap in gold terms. Instead, the most likely correction will take place in the stock market itself, either because the dollar sinks or because stocks sink…or both.

Meanwhile, Rajan Menon looks at the dollar sinking.

Gas prices have soared since February 28, the day the war began. Benchmark Brent crude has crossed the $100 mark three times and at one point reached $120. The price fluctuates but has remained well above $66.60, where it stood on February 27. On March 16, the average price was $3.71/gallon compared to $2.92 on February 28 — a 24 percent increase.

There are 13 million heavy cargo trucks in the US, Menon points out. They had revenue totaling nearly a trillion dollars last year. But on March 2nd they bought diesel fuel for about $3.89 a gallon. Now, it’s averaging nearly $5. Delivery costs are going up.

So are farm products. Fertilizers have gone up about a third in the last two weeks. Much of the world’s supply comes from the petro-chemical companies in the Gulf. Farmers will pass along the costs — to the consumer.

In addition, the consumer is looking at tariff taxes of 10% to 15% on all imported items. Households are going to have to cut back.

But the feds have access to all the fake credit they want. No need for them to cut back. They took in $2.1 trillion in tax revenue so far this fiscal year. But they spent $3.1 trillion. Uh oh. That’s a trillion-dollar shortfall...$200 billion per month.

And that doesn’t include the costs of the war. So far, they’re running at more than $1 billion per day.

But government estimates are notoriously awful. Time and money are often gleefully underestimated. The Iraq war was estimated to cost $50-$60 billion, according to the Bush Team. The final costs now tote to $5 trillion — 100 times as much.

Like Russia and debt, wars are easy to get into but hard to get out of.

In light of the above, we’ll stay in our Maximum Safety foxhole...at least until we get a clearer picture of what is going on.

Regards,

Bill Bonner

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