Mayweather Pacquiao Fight and the Declining Value of the U.S. Dollar

Mayweather Pacquiao FightOn Saturday, May 2, 2015, two modern-day legends of boxing, Floyd Mayweather and Manny Pacquiao, fought at the MGM Grand Garden Arena in Las Vegas, Nevada.

Mayweather won the fight, but both boxers were big winners. By conservative measures, Mayweather and Pacquiao earned a combined $300 million for the fight! (Source: International Business Times, May 4, 2015.)

In 1971, two other legends fought in the squared circle—back then, it was in Madison Square Garden. Their names are still remembered to this day: Muhammad Ali and Joe Frazier. Their payday was nothing like these days: they were only paid about $2.5 million each. (Source: Muhammad Ali: Through the Eyes of the World, last accessed May 5, 2015.)

If this isn’t a classic example of hyperinflation, then I don’t know what is.

Over the past 44 years, the pay for boxers has gone up by 5,900%! This is about 134% per year (straight math). And back when Ali and Frazier fought, people were astonished as to how much money these fighters were making.

Don’t Rule Out Declining Value of U.S. Dollar

As it stands, a period of high inflation or hyperinflation is not on most economists’ radar (except for mine). The Federal Reserve says there is next to no inflation in the U.S. economy; the popular media says there is no inflation. Don’t be fooled by this. Inflation figures quoted by the government are very skewed. They don’t pay attention to things that matter to the average American.

Over the past few years, the Federal Reserve has printed $3.5 trillion out of thin air. The more paper money in the system, the less it’s worth. And historically, whenever vast printing schemes have taken place in a country, the value of money has eventually declined and prices have soared.

Is Money Really Worth Anything Anymore?

In these pages, over the past few months, I have posted plenty of evidence on the deterioration of the value of paper money. You can see a classic example here. In many cases, the boxing fight of Mayweather and Pacquiao being just one reference, hyperinflation is already present.

Looking at all this, how can I help but be bullish on gold? It has a great track record of preserving wealth. Many currencies have failed through history, but over the past 5,000 years, the yellow metal hasn’t failed in what it does best: store wealth.