$1900 Gold Will Depress Growth — So Did $1200, $500, And $36 Gold

(Photo by Andrej Barabasz) (CC BY) (Resized/Cropped)
If Tom Brady wanted, he could be the NFL’s fastest player. His personal trainers or someone on the Tampa Bay staff would simply need to redefine two seconds as one second, at which point Brady’s 6+ second 40-yard dash time would be 3 seconds. NFL’s fastest man like that!
To which the half-awake would gently point out that changing the length of the second wouldn’t alter Brady’s speed one iota. He’d still be one of the NFL’s slowest quarterbacks and players. A second is just a measure. Changing the measure doesn’t change reality. So very true.
Too bad economists and politicians don’t understand what is so basic to the densest of dense sports fans. The dollar, like the second or foot, is just a measure. Movements in its value don’t alter the real price of anything.
Which brings us to the gold price. As of this writing, the dollar buys 1/1935th of an ounce of gold. In January of 2017 a dollar purchased 1/1200th of an ounce of gold. In January of 2000, a dollar purchased 1/266th of a gold ounce. In 1970, a dollar purchased 1/35th of a gold ounce.
Some may respond that gold has “soared” since 1970. In truth, the dollar has sunk in value. Gold has long been a way to measure the value of money precisely because its value is so stable due to unique stock/flow characteristics. As 19th century free thinker John Stuart Mill explained it about gold, it is “least influenced by any of the causes which produce fluctuations of value.” That’s why currency regimes around the world have for centuries gravitated toward the yellow metal as their definer. Since it generally doesn’t move, movements of gold in the currencies in which it’s priced signal a decline, increase or stability in the purchasing power of the currency.
John Tamny is a Forbes contributor, Director of the Center for Economic Freedom at FreedomWorks, editor of RealClearMarkets, and a senior economic adviser to Toreador Research & Trading. He’s the author of “Who Needs the Fed?” (Encounter 2016), along with “Popular Economics” (Regnery, 2015).
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