Priced in Gold – March 15, 2009

            You’ll never make sense of the market turmoil (finance, stocks, bonds, real estate, etc.) that we are seeing and that will continue getting worse, if you price things in dollars. You won’t make wise decisions about your future or your investments if you price things in dollars. That’s like using a barometer to take the temperature. Currencies are a poor way to measure things because they are a depreciating yardstick.

   Consider gold: its value has not changed much in 5,000 years. Now read that sentence again. Yes, the price of gold has increase fourfold over the last 7 years. But, that’s the price of gold as measured in dollars. The VALUE of gold changes little over time. The value of gold is measured in what gold can buy.

   The article I wrote last fall titled “The Crash of 2007” was a crash course in Economics 101 and Currency Theory and showed how the financial collapse had begun and would unfold like a slow motion train wreck. In it I wrote about gold:

    “…in Babylon (600 BCE) an ounce of gold could buy 350 loaves of bread. Today, the price of a loaf of good bread is about $2.00 and the price of gold is about $700 an ounce. Divide $700 by $2.00 and you get 350 loaves of bread just like 600 BCE. This demonstrates that the value of gold doesn’t change very much over time. What’s changed is the number of dollars it takes to buy an ounce of gold.”

   Today, March 15, 2008, the price of gold is $1,002.50. Today, I bought a good loaf of multi-grain for $2.89. Do the math. The baker says at today’s price of flour he’s losing money and will have to increase the price of bread. You can bet the price of gold will rise accordingly.

   Here’s another example:

In the mid 1800’s, a cowboy with a $20 gold coin (one ounce) could go to town and buy himself

 – a haircut

 – a decent suit

 – a good meal

 – a room for the night

 – a fancy lady of the evening

Today, your truck-drivin’ urban cowboy can go to town with $1,000 dollars (i.e. one ounce of gold) and buy himself the same things

 – a haircut

 – a decent suit

 – a good meal

 – a room for the night

 – a fancy lady of the evening

   Here’s an American example:

One ounce of gold could buy a top quality men’s suit

 – after the American Revolution in 1776

 – after the American Civil War in 1865

 – after WW II in 1945

 – today

    This constant value of gold throughout history makes gold a very accurate measuring stick. If you want to see the real value of things go to Note: some of the charts no longer work because of changes to their charting service: they’re working on it. It’s not a conspiracy (at least I don’t think so; nowadays you can never be sure.)

    Mainstream financial analysts, advisors as well as government stooges and the ass media are still in the dinosaur age measuring assets in currency. There was a big to-do when the Dow topped 14,000. Big deal! Priced in gold, the Dow has been crashing since 2001. Analysts say base metals are over-valued. Not priced in gold, they aren’t. Crude oil and gas is high? It’s the same price as it was in 2000.

    Here’s an interesting interview with Peter Schiff of Euro/Pacific and former government stooge Art Laffer (former Reagan economic adviser) that took place in 2006. Letting the events of the last two years guide you, this is almost embarrassing. And, oh yeah, 7 month pregnant waitresses really love to work.

    Brokers and financial advisors will discourage you from owning gold and silver. They say it’s a poor investment. On that, at least, they’re right. Gold is not an investment. Gold is a hedge. Gold is a way to preserve your money from the ravages of inflation which the government says is less than 3% but is actually about 8 – 10% in Canada and much higher in the U.S.. Silver works much the same way and has often been called the poor man’s gold. Money in a high interest savings account or GIC’s is losing value. The inflation rate will get much worse in the future and your money will lose even more purchasing power.

    If you want to use gold or silver coins or bullion to preserve your money, own the physical stuff. Avoid storing it at a dealer. You may never see it. Use ETF’s (Exchange Traded Funds) strictly for speculation (I do) but not as a hedge.

    If you want to buy gold or silver and you live in Canada, I recommend

1711 Corydon
Winnipeg, MB R3N 0J9
204-489-9112 (inquiries)
800-565-2646 (orders only)

   I’ve dealt with them since 1979. They are reputable. If you’re out of town, they’ll ask for a credit card number for a deposit (usually $50) and will credit the deposit when they receive your cheque, money order or bank draft and then they’ll ship by ExpressPost.

   I do not recommend putting all your money into gold or silver because there is always a slight risk the government will outlaw the possession of gold and silver (it happened in the U.S. in 1933 and even safety deposit boxes were monitored.) I think this risk is slight because when currencies collapse world-wide (notice I said “when” not “if”) we will go back on the gold standard.

    I’ll make one more prediction: Barrick will eventually own most of the free world’s gold mines. That shouldn’t stop you from investing in other gold mines. Barrick will buy them all so you’ll make money if you invest in them. For an interesting treat look at Barrick’s “honorary directors” on the internet for a list of political “who’s who.” Nothing short of a revolution will stop this and, as long as Joe Sixpack has his TV, beer & pizza, that ain’t gonna happen.

March 15, 2008

Disclaimer: I’m not an investment advisor and these articles are for commentary only. For specific advice you should consult your own investment professional.

Your comments are WELCOME! Lengthy comments may time-out before you’re finished so consider doing them in a word doc first then copy and paste to “Leave a Reply” below.

About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I'm back in stocks. I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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