The years 2014-18 have seen a departure from the years that preceded them in the twenty-first century. Gold has been stable in this latter period, our own, moving in about a 6-percent band against the dollar. The highest gold has gotten over the last four years is about $1,370, the lowest about $1,070, with most of the trading being in the $1,190-$1260 range. It’s now at around $1,230.
The dollar wants back up on that cross of gold.
From 2000 to 2014, in contrast, gold gyrated wildly. It began the millennium testing levels below $300, a low barely seen since the 1970s. Beginning in 2002, it staged a long march, striding up past every ordinal threshold, through $1,000 with the passing years, hitting as high as $1,800 in 2011. Within this 600-percent range, $300-$1,800, there were large swings. 2008 alone had gold moving up and down in a 25 percent band. Then in early 2014, gold settled in its present range—a hundredth of the 2000-2014 range and a fourth of that of 2008.
Random occurrences? Not likely. The price of gold—especially over any significant span of time—is the greatest measure of one key economic datum: global market confidence in the dollar. This millennium’s price history suggests that the world was progressively souring on the dollar from 2000 to 2014, inclusive of bouts of reconsideration; that it warmed to the dollar until 2014; and then decided that there was little need to speculate against or in favor of the dollar.
It is not coincidental, therefore, that in this last period, economic activity has been superior, as opposed to before in the 2000s. If economic decision-makers have confidence in the value of the dollar, they will devote more of their precious attention (a scarce resource if there ever was one) to real economic activities.
But why—why the newfound stability against the precedent of gyration and devaluation?
Three causes appear likely. The first has been noticed by Nathan Lewis, the supply-side reniassance man. Nathan has pointed out that the dollar’s new stability against gold coincided with Janet Yellen’s taking the helm at the Federal Reserve. Nathan even went so far to suggest that my own comments to Chair Yellen early in her time at the Fed, championing a classical monetary policy, guided her toward this goal.
I’ll take that—on the condition that we see that the currency masters as a whole, in the U.S. government, in the Treasury, the Fed, and elsewhere, appear on or about 2014, to have begun to conduct policy such that the dollar would hold against gold. Some of this had to do, surely, with the overly academically confident Ben Bernanke leaving the Fed, for Yellen, who throughout her career has displayed less brazen confidence in her Keynesianism than Bernanke ever did in his.
But it was not only me on or about 2014 warning the government to get real about the dollar. It was a lot more. This was, as well, the period just prior to great second-leg expansion of the cryptocurrencies.