Economists are empirical and deterministic.

As in philosophy, it's a dumb-ass view.

Economists carry about their person a common religious belief, that for every cause, there is an effect, but more so, that reality may be somehow summed this way.

Of course like relativity theorists, economists have come to appreciate the intellectually unconquerable infinite variety of "causes" and "effects".

Economists though, generally resign themselves to making a best guestimate -because the complexity of the infinite realms they recognize through their tightly-sewn blinders -can only be approximated.

This of course not only leaves open the possibility of stunning surprises, -it makes them notable sites along the way of the development of often rapidly outdated and often misapplied economic theories.

Like the universe of the relativity theorist, -in the universe of the economic theorist, the gravity of everything affects the movement of everything else.

Designing and hyping complicated theoretical models around this 19th Century idea, even though these models might only work once in a great long while, and then imperfectly, -is often enough to earn an economist the designation of "economic genius", especially if they are judging their own intellectual prowess, or that of someone within their clique of economic idiot savants.

Princeton comes to mind...

In a closed sense, relativity theorists will tell you they know what this gravity is.

And in a closed sense, economic theorists will tell you they know what economic gravity is too.

The assumptions behind both perceptions of gravity leave gaping holes, absent knowledge, bear-traps, gully-washers and can leave observations non-sensible and unexplainable.

"Anomalies" they call them.

Out in the vacuum of space, for instance, the relativity theorists' understanding of inertia subverts their "sensible" understanding of gravity.

If an object spins fast enough, it will fly apart. But, how does an object in space even know that it is spinning? and not that all of space around it is orbiting ever faster the object instead? And why, -should it make a difference?

In economics the theorists must contend with similar problems. Is the price of gold rising? Or is the value of the dollar being pushed down?

Is the demand for the dollar abating? Or is this demand simply being forcibly postponed?

Prather discusses "Currency Depreciation" stating, "During the depression of the 1930's, many countries adopted the policy of depreciating their currency units; and among the advantages sought therefrom were an increase in exports and a decrease in unemployment (a policy referred to as exporting unemployment)."

So the dollar is spinning rapidly. It could fly apart. Or, unlike what any observer might think, it might indeed be the entire universe orbiting the dollar ever faster.

And what will be the result when the dollar suddenly ceases to spin and it is seen then to impossibly reverse its course?

Someone is going to go flying off this economic merry-go-round sooner or later.

It will not be the dollar, because the dollar is at the center of the hub that is spinning rapidly.

It's like you read my mind. A couple of days ago I was wondering about golds value to other currencys. There's a tendency to be myopic when it comes to just looking at things from a USD point of view. I hope you do something like this again.

love this blog, such reasoned commentary

could you give a roundup on the specifics of how people are investing in gold? I can see it being a good hedge, but not sure how to get involved

I don't know about you Einsteins, but all three charts are in an upward trend. The USD trend just has a higher slope.

Gold has a nominal gain in ALL three charts, and in ALL currencies.