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Understanding Your Gold Value and Inflation

Written by Subject: Economy - Economics USA

Understanding Your Gold Value and Inflation

By Barry Hess



I remember the first time I read a specific quote credited to, Henry Ford, the automobile magnate. It wasn’t so much that the quote itself struck me as worthy of using it in my own repertoire, as it was that the subject seemed very misplaced from a man only educated through the forth grade.


I read it over and over, looking for some reason that anyone would have thought it worth quoting.  I still didn’t ‘get it’.  He was speaking about the American ‘system’ of “money”, and that was a concept even an overly-curious eleventh-grader couldn’t begin to wrap his easily-distracted head around.  After all, what ‘system’ could there be to “money”?  I knew enough to know that money is money, is money, is money ad infinitum.  A dollar’s a dollar.  That’s all the thought it required, and I dismissed it as one of those “Great Quotes” that even being included in Bartlett’s Great Quotations can’t really make ‘great’.


The reason I decided to enter this commentary in the annals of history is because a few days ago I was talking with a man I had only just met.  In the course of the conversation he stated that everything goes up in price ‘naturally’.  I asked him, “Why?”  He answered, “Inflation”, matter-of-factly.  I asked, “What’s inflation?”  He looked at me as though he were instructing a child, “It’s when the prices go up”.


Wow!  This was a full-grown man who is more than happy to share his circular logic and straight-line ignorance with the World. Could there be many more like him?


Henry’s quote popped into my head and I couldn’t get it out.  Try as I did to dismiss it, it just kept coming back over and over, like a bad case of hiccoughs.  I couldn’t avoid actually ‘thinking’ about what he was trying to say, again, only this time I had an extra thirty-five years worth of experiential perspective to throw into the hopper of consideration.


“If the American People ever came to understand how their money system now works, there would be an armed and violent revolution by morning” Henry Ford, (conscientiously paraphrased)


Why would Henry have said such a thing?  It sounds like he was a little exaggerative and obviously had thrown too much emotional passion into his words.  I still wasn’t ‘getting it’.  How could anyone possibly advance the notion that anything about ‘buying and selling’ or ‘loaning and borrowing’, could get people up off the couch, let alone out into the streets?


Then it struck me, he wasn’t talking about those things; he was talking about something a lot closer to each individual American.  I finally ‘got it’ but was at a loss as to how to explain it in a way that others would understand more quickly than I had.


Against the backdrop of this Depression, and all the talk about the great mortgage fraud swindle, the printing of currency in unheard of quantities (without bringing any value to the market whatsoever), and the ‘charging’ of interest on something that simply doesn’t exist (credit), it was inevitable that our ‘system’ of money (the “Federal Reserve” debt-based currency) would openly be put under scrutiny. Sometimes, even the Olde Media is obliged to talk about it.


I think the problem is that most people have been convinced that it’s best they don’t even try to understand all the intricacies and entwined mechanizations of how “that financial stuff” works.  How could any one put this complex system into simple terms?


I’ll try, here’s how…we’ll start on even-ground by defining our terms.  ‘Money’ is defined “as a necessary medium of exchange”. Okay?  The true value of money is determined by what it will buy, in terms of tangible commodities, versus the effort it took to get it. 


The ONLY limited commodity any of us has, is the number of minutes we will be alive and breathing. Therefore our personal ‘minutes’ are the perfect standard on which to base our ideas of anything’s true value. 


It would be perfect if we knew in advance, just exactly ‘how many’ minutes we might each get to experience. And therein lays the problem.  


Our ‘money value’ would give us a clear ‘worth’ by considering ‘money’ to be a memorialization of the minutes it takes for us to acquire each currency unit or denomination. Our ‘worth’, in Federal Reserve ‘dollars’ could be said to equal the number of irreplaceable minutes you had to expend to get them.  How many of your personal minutes was your wristwatch worth to you?


Since the number of minutes each of us has varies, and is usually not something any of us knows in advance, we need to look at something more tangible historically, to illustrate what’s happened to the ‘spend able value’ of an average hour’s labor.


I chose gold, (as a commodity), as a standard because it has maintained consistent value in all human civilizations, for thousands of years.  In Roman times, for instance, one single Troy Ounce of gold could be traded for a high-quality toga with the proper accessories, a fine pair of sandals, a good dinner at the finest eatery…and a loaf of bread.


Today, in 2009, a single Troy Ounce of gold has the same value.  It can buy you a fine suit of clothes with shirt, tie, belt and accessories ($600.00), a nice pair of shoes ($250.00), a fancy meal with appropriate libations ($150.00) and a loaf of bread…..


Gold has consistently been a great investment, not because it gains value—but because it doesn’t ‘lose’ any value.  The first Law of successful investing is the ‘Law of Capital Preservation’.  The best investors are those who don’t lose money.


This raises the question, “How can my money (Federal Reserve dollars) LOSE its value?”  “How?” is not the subject of this commentary?  That’s all the complicated stuff that’s better left to the pundits to spin.   Simple is better to ‘show’ you the effect the Federal Reserve has had on your hard-earned dollars. 


I chose the year 1973 for my illustration because that was the year the last vestiges of a “gold-backed” Dollar were legislated out of existence.  Since then, Federal Reserve dollars have ‘officially’ been worth what the Federal Reserve says they are.  That sounds nice, but in fact and practical experience, no matter what the Federal Reserve ‘says’ their paper money is ‘worth’, it’s actual value is determined by what tangible goods or services you can purchase with it.  


Using, how much gold (unchanging value), to determine how much you’re worth per-hour gives us a clear valuation for comparison, and explains the ‘inflation’ of our currency. 


With all the mandatory wage laws, union influences and government regulation, you’d think your standard of living has necessarily gone ‘up’ since 1973, right?  Let’s see.


I did some research and found figures that were pretty much consistent among official government census sources and private surveys.


Here’s what I came up with. In 1973, the average, individual American earned $29,000.00 per year.  That was the ‘average’ (the number of people divided by the total amount of dollars earned); the ‘median’ (the amount the greatest number of people actually earned) was $30,943.00.


Whoa!  How could most people earning $30,943.00 ‘average’ out to only $29,000.00?  Well, included in the ‘average’ are a small number of people earning a lot less than the ‘mean’; they pulled the ‘average’ down. 


What really got my attention was discovering that by the government’s own admission, since 1973 (to 2009) Americans actually LOST 2% in income, as measured in the number of Federal Reserve dollars we are paid.  That’s right, the median income is now $27,590.00.  That may be startling, but to round out the research I had to find the ‘average’.  I found different ‘averages’, ranging from $55,000.00 to $60,000.00.  To be triply fair, one study did put the ‘average’ single American income at $150,000.00.


Now how could that be? What raised the average?  The answer was amazing, there are now a small number of people who make so much money, that they pull the ‘average’ way, way up.  Wow!


I needed to know how many Federal Reserve dollars it took to buy 1 Troy ounce of gold in each of the years 1973 and 2009 to illustrate the point of this commentary.  I decided to use the higher ‘retail’ price (what its offered to the public for) of gold in 1973 and the lower ‘spot’ price (what its offered to dealers for) of gold for 2009 just to make sure nobody could question this ultra-conservative example.


The retail price of 1 Troy Ounce of gold in 1973 was $42.00 ($33.00 spot price).


The spot price of 1 Troy Ounce of gold in 2009 is about $1,000.00.


One last thing; to figure an hourly gold ‘value’, I’m using a standard model of 40 hours per week, and 50 weeks per year.  A total of 2,000 hours annually.


Now we’ve got all the information we need to do a quick study to see what’s really happened to your time, in terms of its tangible value.  Let’s see how much your labor is really worth.


If you earned the ‘average’ of $29,000.00 for your 2,000 hours of work, in 1973, you could buy 690 ½ Troy Ounces of gold for all the minutes you put in at the office.  Your marketable value was, 690 ½ Ounces per year, or .3452 Ounces of gold (more than 1/3 of an ounce) per hour.  1 Ounce of gold was worth 174 of your Life minutes (2.9 hours—less than 1/3 of a full working day), to your employer.


If, you earn the highest cited average of $150,000.00 today, in 2009, your 2,000 hours of work can buy you 150 Troy Ounces of gold and your marketable value, is only .0750 Ounces of gold (that’s, ¾ of 1/10 of 1 Troy Ounce of gold) per hour.  1 Ounce of gold is worth 799.8 of your Life minutes (13.33 hours—about 1 ¾ full working days) in the marketplace. 


Scary, huh?


But what if your “real” average isn’t $150,000.00?  What if your income is the more generally-accepted ‘average’ of $60,000.00 (60 Ounces/year) these days?  If so, your gold value-per-hour drops to .0300 (3/100ths of 1 Ounce of gold).  1 Ounce of gold is worth 1,999.80 of your Life minutes (33.33 hours—4.16 full working days) in the marketplace.


Just for the sake of completeness, let’s say you’re the median income earner in 2009, making $27,590.00 per year (27.59 Troy Ounces/year).  That means your gold-per-hour value is only .0137 ounces! (barely over 1/100th of 1 Troy Ounce).  1 Ounce of gold is worth 4,379.4 of your Life minutes, (72.99 hours—more than 9 full working days) in the marketplace!


This is how Bankers think. They know enough to make sure they always get value for their minutes, not currency.  Now you know why they demand what look like huge salaries and bonus’, they’re just keeping up with “inflation”.


If you were earning $30,000.00 in 1973, you have to presently be earning at least $690,000.00 now, to have stayed at exactly the same standard of living—if not, you’ve lost pretty serious ground.  How’s that workin’ out for you?


If you’re only being paid $30,000.00 now, you’ve lost over 75% of your gold-value-per-hour.  You’re now being paid less than 1 Federal Reserve dollar, in real, spendable value, for every 4 Federal Reserve dollars you earned back in 1973.  That means, of course, that no matter what you were doing back in 1973, you were being paid more than four times more for your time than you are now.  The 1973 ‘marketplace’ (Corporate America, in this case) thought keeping you happy and comfortable was worth five times more than it does today.  Why is that?


How did your time (your personal minutes) get to be worth so much less to the people who decide how much they will pay you?  It didn’t, you was robbed.  “But who would do such a thing?”  The ONLY ones who could, the system…the Federal Reserve Bankers and the politicians who serve them.  Do you think its just coincidence that the ‘Banksters’ ONLY pay each other, in GOLD? There’s neither honor nor trust between thieves. 


Is your couch feeling a little less like the place you should be?  Hopefully it does and Henry Ford’s prognostication will come true sooner, rather than later.  The question is; will you continue to be a willing victim of robbery, or will you stand up to restore value to your minutes?  It’s up to you.  You just have to make a choice.


By the way, if you throw the individual tax burden in the most extreme example above, it goes even crazier.  In 1973 the average tax burden was about $2,700.00 (about 1/10th of income), in 2009, earning $150,000.00, your burden is about $60,000.00 (more than 3/10th s of income).  So, in addition to de-valuing your Life minutes by 75-80%, you’ve been shouldered with 3 times more taxes!


If de-basing the stored-value of our currency, more than tripling our tax rates, robbing us of our individual Life minutes, stealing your labor and trapping your children and theirs in pre-natal debt, isn’t enough to inspire a revolution, what is? What’s a Revolution ‘worth’, in gold, these days?


I’m not even going to try to debate the precision of the data used herein (I’ll leave that to the people who want to), but one thing is certain I used the widest possible extremes in my examples to purposely skew the results AGAINST my premise.  The actual numbers can only be worse.


If I may throw in my two personal cents, the sooner we get rid of the thieves, the sooner we’ll get rid of the thievery. 


Maybe then we can all go back to appreciating our minutes.

1 Comments in Response to

Comment by Barry Hess
Entered on:

While I appreciate all the comments people have sent to me directly, I'd ask that you comment on the article in this forum.  Who knows, maybe this "Gold Value" thing will catch on.

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