The price of gas is still 20 cents, in 90% silver dimes.

[AyeYo]

there is a lot to hate about fiat, but I hate this constant misleading twaddle.

as mentioned you didnt earn that much back then.

silver is also way higher now than in the 90s.. so you are cherry picking.

gas is a limited resource, it really doesnt matter your comparison, GAS IS GETTING MORE EXPENSIVE AND IT HAS NOTHING TO DO WITH FIAT(well ok there is a fiat component but there is also a supply and demand component) and when you use gas, it goes away, unlike when you use gold.


This is nothing more than twaddle designed to mislead

There will come a day that supply finally peaks worldwide (and this might have already happened, but demand is also down from 2007) and then the cost of energy is going to rise.  We are not there yet, however; so (due to the competitive nature of oil refineries) so the primary contributers to the cost of a gallon of gas are 1) production & shipping and 2) goverment taxes.  Usually in that order, but I believe they are reversed in parts of Europe.  Middle Eastern dictators make a fortune from exporting oil (primarily) because they pay local skilled labor wages that are lower than they would be in the US or Europe while charging slightly less than the cost of production for those same regions (those that still have oil, anyway).  The proven reserves of oil in the US are higher than those of Saudi Arabia, but those are not "economicly viable" reserves so long as the Saudis can provide oil cheaper.

Thus, the cost of a gallon of gas has been fairly stable (measured over months to years, not days) when viewed relative to either silver or gold.  I admit the article is biased, and so am I, towards silver.  Gold would probably have been a better comparison.  Yet, the point stands.  Inflation isn't the prices rising, it's the value of the currency dropping.  Gold and silver both (tend) to reflect that debasement in their spot pricing, over the long term.

Yea bro, the price of oil is definitely steady when adjusted for inflation...




It's so easy to demolish you with simple and easy to find facts and numbers.


Someday the gold bugs will realize that gold is not the holy grail of absolute value.   It's a commodity (a shitty one at that) and fear investment whose value fluctuates significantly based on speculation.  Silver is even less reliable as a constant store of value, as even a passing glance at a silver price chart will show anyone with working eyes.

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[Fakeman]

I like gold and silver but I agree with AyeYo (for once?) that they are not a magic measuring stick of value. You can presuppose that gold's "value" is constant and that it's the values of everything else that fluctuate in relation to it, but that's just a game of semantics. On the other hand, we all know that paper money doesn't just fluctuate over the long term but also gradually approaches zero buying power in most cases. Almost any commodity metal is better than that as a long term store of value, but many of them take up a lot more space per unit of value than silver and gold do.

[MoonShadow]

there is a lot to hate about fiat, but I hate this constant misleading twaddle.

as mentioned you didnt earn that much back then.

silver is also way higher now than in the 90s.. so you are cherry picking.

gas is a limited resource, it really doesnt matter your comparison, GAS IS GETTING MORE EXPENSIVE AND IT HAS NOTHING TO DO WITH FIAT(well ok there is a fiat component but there is also a supply and demand component) and when you use gas, it goes away, unlike when you use gold.


This is nothing more than twaddle designed to mislead

There will come a day that supply finally peaks worldwide (and this might have already happened, but demand is also down from 2007) and then the cost of energy is going to rise.  We are not there yet, however; so (due to the competitive nature of oil refineries) so the primary contributers to the cost of a gallon of gas are 1) production & shipping and 2) goverment taxes.  Usually in that order, but I believe they are reversed in parts of Europe.  Middle Eastern dictators make a fortune from exporting oil (primarily) because they pay local skilled labor wages that are lower than they would be in the US or Europe while charging slightly less than the cost of production for those same regions (those that still have oil, anyway).  The proven reserves of oil in the US are higher than those of Saudi Arabia, but those are not "economicly viable" reserves so long as the Saudis can provide oil cheaper.

Thus, the cost of a gallon of gas has been fairly stable (measured over months to years, not days) when viewed relative to either silver or gold.  I admit the article is biased, and so am I, towards silver.  Gold would probably have been a better comparison.  Yet, the point stands.  Inflation isn't the prices rising, it's the value of the currency dropping.  Gold and silver both (tend) to reflect that debasement in their spot pricing, over the long term.

Yea bro, the price of oil is definitely steady when adjusted for inflation...




It's so easy to demolish you with simple and easy to find facts and numbers.


Someday the gold bugs will realize that gold is not the holy grail of absolute value.   It's a commodity (a shitty one at that) and fear investment whose value fluctuates significantly based on speculation.  Silver is even less reliable as a constant store of value, as even a passing glance at a silver price chart will show anyone with working eyes.

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

[AyeYo]

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

And that idiotic conclusion makes as much sense as looking at a town in which 10 residents make $1mil/year and 10 make $1,000 year and then going around telling people that the town is well off because the average income is $500,500/year.  Or it's like telling someone a hiking trail is flat because the starting and ending elevations are the same... totally ignoring the fact that it's got +/- 6,000ft. of elevation change in between.

A flat trend line doesn't mean a damn thing when we've had 500% price fluctuations over the years.


Furthermore, if you extend it up to 2011, the trend line is no longer flat.  That chart doesn't show the run up to $140+ and it doesn't show the following crash to <$40.  It doesn't include the years following that crash in which it's never seen sub $80.  The trend is clearly UP.

[MoonShadow]

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

And that idiotic conclusion makes as much sense as looking at a town in which 10 residents make $1mil/year and 10 make $1,000 year and then going around telling people that the town is well off because the average income is $500,500/year.  Or it's like telling someone a hiking trail is flat because the starting and ending elevations are the same... totally ignoring the fact that it's got +/- 6,000ft. of elevation change in between.

A flat trend line doesn't mean a damn thing when we've had 500% price fluctuations over the years.

We haven't had 500% price fluctuations over the past 120 years.  Oil was first discovered in 1861, the first 20 years mostly involved finding a use for it and then developing the tech to get it out of the ground.

And if you don't think that the 10 residents of that town that make $1000 per year are better off than you are, then you have no concept of reality.  The adult children of the wealthy residents don't make anything in the real world, but I'd wager that you would rather be them then their hard earning father.

[AyeYo]

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

And that idiotic conclusion makes as much sense as looking at a town in which 10 residents make $1mil/year and 10 make $1,000 year and then going around telling people that the town is well off because the average income is $500,500/year.  Or it's like telling someone a hiking trail is flat because the starting and ending elevations are the same... totally ignoring the fact that it's got +/- 6,000ft. of elevation change in between.

A flat trend line doesn't mean a damn thing when we've had 500% price fluctuations over the years.

We haven't had 500% price fluctuations over the past 120 years.  Oil was first discovered in 1861, the first 20 years mostly involved finding a use for it and then developing the tech to get it out of the ground.

We haven't?  We must not be looking at the same chart.  I see a low price of $10 and hit a high of ~$150 (so about $130-140 conservatively corrected to 2006 dollars for that chart).  So you're right, we haven't had 500% price fluctuations, we've had more like 1,500% fluctuations.

Shit man, we've had price swings range from $140 to $35 within the last decade.

[MoonShadow]

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

And that idiotic conclusion makes as much sense as looking at a town in which 10 residents make $1mil/year and 10 make $1,000 year and then going around telling people that the town is well off because the average income is $500,500/year.  Or it's like telling someone a hiking trail is flat because the starting and ending elevations are the same... totally ignoring the fact that it's got +/- 6,000ft. of elevation change in between.

A flat trend line doesn't mean a damn thing when we've had 500% price fluctuations over the years.

We haven't had 500% price fluctuations over the past 120 years.  Oil was first discovered in 1861, the first 20 years mostly involved finding a use for it and then developing the tech to get it out of the ground.

We haven't?  We must not be looking at the same chart.  I see a low price of $10 and hit a high of ~$150 (so about $130-140 conservatively corrected to 2006 dollars for that chart).  So you're right, we haven't had 500% price fluctuations, we've had more like 1,500% fluctuations.

Shit man, we've had price swings range from $140 to $35 within the last decade.

Oh, I'm sorry, that's a dollar chart!  I thought you had actually posted something relevant to a topic for once!  I should have known better.

I already stated that I'm talking about the average across years, not the spikes; and relative to silver, not US FRN.  Of course, I shouldn't expect you to actually read any posts that precede yours. that not being your style of debate.

[AyeYo]

Oh, I'm sorry, that's a dollar chart!  I thought you had actually posted something relevant to a topic for once!  I should have known better.

I already stated that I'm talking about the average across years, not the spikes; and relative to silver, not US FRN.  Of course, I shouldn't expect you to actually read any posts that precede yours. that not being your style of debate.

I just explained to you why averages are meaningless and actually ridiculously misleading in many cases.

The chart is inflation corrected, so it shows the actual cost of oil and the fact that it is NOT steady, as you said.  I understand what you said perfectly.  Your argument is that silver maintains a constant value (untrue), oil priced in silver has been the same price since ever (untrue), therefore oil price fluctuations should be attributed almost entirely to the value of the dollar (untrue).

[The Script]

Certainly gold and silver prices fluctuate versus currencies and commodities just like everything else on the market.  The argument against fiat is that having a currency pegged to gold and silver makes your currency much more stable and decentralizes the control of the currency.  Fiat currencies are controlled by the central bank which can inflate at will ruining your savings and destroying the purchasing power of the dollar. 

For example, here is a chart of the purchasing power of the US dollar from 1792-2011.  Note the dotted lines where we went off "hard currency".



http://www.wealthwire.com/news/inflation/773

[AyeYo]

Certainly gold and silver prices fluctuate versus currencies and commodities just like everything else on the market.  The argument against fiat is that having a currency pegged to gold and silver makes your currency much more stable and decentralizes the control of the currency.  Fiat currencies are controlled by the central bank which can inflate at will ruining your savings and destroying the purchasing power of the dollar.  

For example, here is a chart of the purchasing power of the US dollar from 1792-2011.  Note the dotted lines where we went off "hard currency".



http://www.wealthwire.com/news/inflation/773

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

[The Script]

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

[Raize]

Yea bro, the price of oil is definitely steady when adjusted for inflation...

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

On August 9, 1971, Richard Nixon closed the gold window. The dollar could no longer be converted into gold.

[AyeYo]

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

The best place to start is to ask yourself... lost purchasing power against what?  Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar?  Why not use eggs, milk, iron, corn, sheep, oil, etc.?

A loaf of bread cost $0.05 1930 and it costs $3.00 today, but is that the whole story?  $0.05 was a couple hours' wage back in 1930.  $3.00 is less than half of minimum hourly wage today.  So yea, you could purchase a nice car for $2,500 back in the day, but that was a year's salary for many people.  So were people really better off when the dollar's purchasing power was higher?  Obviously a good bit of that chart is exaggeration and hyperbole, because the average American wasn't exactly rolling in wealth when the dollar was at its supposed peak.


The dollar's purchasing power is entirely relative.  If real wages increase at the same rate the dollar declines in value, then the decline isn't really a big deal - stuff costs more, but everyone makes more. If real wages increase at a slower rate than the dollar declines (or decline themselves), then we've got issues.  Obviously that's only the tip of the iceberg (foreign trade really messes everything up), but it's a good place to start to decide whether the decline is of concern or not.

[SgtSpike]

The dollar being pegged to gold is what started the deflationary spiral we call "The Great Depression".

[MoonShadow]

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

The best place to start is to ask yourself... lost purchasing power against what?  Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar? 

Yes, it is.  Because it has 5K years of history as the international baseline for money.  The past 100 years is a small data set by comparison.

[MoonShadow]

The dollar being pegged to gold is what started the deflationary spiral we call "The Great Depression".

A commonly believed myth, because that is what is taught to schoolchildren in history books written by historians instead of economists.  Even the majority of Kenyesian Economists reject this concept.  The gold standard was functionally defunct in 1913.  At best, the argument is that the Federal Reserve started a 'deflationary spiral' in 1929-1930 by failure to supply "liquidity"; an argument that has been disproven repeatedly, but persists.

[AyeYo]

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

The best place to start is to ask yourself... lost purchasing power against what?  Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar? 

Yes, it is.  Because it has 5K years of history as the international baseline for money.  The past 100 years is a small data set by comparison.

LOL  You need to brush up on your history.  Everything from rocks to cowhide to glass beads has been used as money.  Tradition is a very poor reason to do anything.

[ansible adams]

Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar?  Why not use eggs, milk, iron, corn, sheep, oil, etc.?

I think you're asking the right questions. Gold and the dollar need to be compared to at least one additional commodity to triangulate stability, but ideally you should compare multiple commodities with substantial historical data. Similar to your suggestion, I might include cement, steel, copper, wool, maize, sulfuric acid, sodium hydroxide, and coal. This includes construction materials, industrial metals, plant and animal farm products, commodity chemicals, and energy. Everything in the collection has been produced and traded on a large scale for at least 100 years.

Once you have the basket of items to compare, you can see how different prices correlate over time. If gold is more stable than the dollar then you should see a stronger positive price correlation coefficient, with lower standard deviation, between gold and the members of the basket of commodities than between the dollar and the basket members. That is, if 1 gram of gold buys 150 kilograms of steel today, and 1 dollar buys 2 kilograms of steel today, the gold to steel ratio should deviate less over time (past and future) than the dollar to steel ratio, and the changes should be positively correlated: steel moves up when gold moves up, steel goes down when gold goes down, and by similar amounts. You can even perform the correlation exercise with pairs of mundane commodities: maybe it turns out that sulfuric acid tracks other commodity prices more closely than dollars or gold, and cautious savers should actually clamor for an acid-backed store of value.

Even without running the exercise over a full century of data -- which I don't have to hand, alas, else I would have -- I don't think gold is going to perform too spectacularly. The tremendous gold price volatility around 1980 was not, so far as I know, reflected nearly to the same degree in mundane commodities like coal and wool. It may well be that gold holds its value better over long periods if you smooth the time series, but people can't (directly) trade in smoothed time series: someone who decided to convert all their saved dollars (or steel, coal, wool...) to gold in July 1980 would have taken a heavy loss only a year later and would have needed to wait 10+ years to recover anything like their previous holdings, converting back from gold to useful commodities. The same specious arguments (scarcity, durability) sometimes advanced now to justify an irreversible value increase for gold were being touted just a few years ago about real estate. Value is always relative.

Let's get back to silver dimes and silver as a value store for a moment. Mercury is rarer in the Earth's crust than silver, it's been known since antiquity, it's shiny and dense, it can be neither created nor destroyed, and supplies and production rate from mining are limited. It even has more desirable properties for commerce: since it's a liquid at room temperature, it can be subdivided for any transaction as needed, down to the limits of the traders' scales. So why do the traditional coinage metals have their privileged position, if (as sometimes claimed) precious metals are "natural" monetary standards rather than reflections of human psychology and historical inertia? Despite all these wonderful attributes of mercury which should make it equally or more precious than silver, it currently trades at less than 5% of silver's price, and no nation has ever backed its paper notes with mercury.

[MoonShadow]

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

The best place to start is to ask yourself... lost purchasing power against what?  Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar? 

Yes, it is.  Because it has 5K years of history as the international baseline for money.  The past 100 years is a small data set by comparison.

LOL  You need to brush up on your history.  Everything from rocks to cowhide to glass beads has been used as money. 

And seashells, salt and nails.  None of which has either the continuous duration of use nor the international scope that gold, silver, copper and yes, even mercury, has had.  Ironicly, considering that citizens of the Roman Republic used nails as money for at least two hundred years, and the trade value of same was so stable (until the Roman Empire began to debase the national currency) that the standard Roman sizes for nails were denominated in the smallest national currency, the Denarius.  This is exactly why, in the United States, the AS metric for nail sizes is shown as a lower case "d"; the denarius became the pence, which became the penny.  So you can go to any hardware store in the US and ask for an 8 "penny" (8 d) nail and they will know exactly what you are talking about.  Yet, an 8 penny nail costs less than 8 pennies.  Why?  Due to productivity improvements in the production of nails, from the mining of iron ore all the way to the automated manufacturing of the flat nail head.  A gold standard does not suffer from the distortions that changes in technology to any degree that is the case for nails, mercury, cow hides or glass beads.  Or even for salt.  Certainly a gold standard has it's own problems, but those are well known problems that are difficult (probably impossible) for individuals, no matter how well connected or well heeled, to distort for any significant duration or degree.

If only the fiat currencies of the world could have had nearly the success of the Roman black iron nail as a trade unit, we wouldn't be having this conversation for another 100 years, and there wouldn't likely have ever been a need for Bitcoin at all.

[AyeYo]

Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar?  Why not use eggs, milk, iron, corn, sheep, oil, etc.?

I think you're asking the right questions. Gold and the dollar need to be compared to at least one additional commodity to triangulate stability, but ideally you should compare multiple commodities with substantial historical data. Similar to your suggestion, I might include cement, steel, copper, wool, maize, sulfuric acid, sodium hydroxide, and coal. This includes construction materials, industrial metals, plant and animal farm products, commodity chemicals, and energy. Everything in the collection has been produced and traded on a large scale for at least 100 years.

Once you have the basket of items to compare, you can see how different prices correlate over time. If gold is more stable than the dollar then you should see a stronger positive price correlation coefficient, with lower standard deviation, between gold and the members of the basket of commodities than between the dollar and the basket members. That is, if 1 gram of gold buys 150 kilograms of steel today, and 1 dollar buys 2 kilograms of steel today, the gold to steel ratio should deviate less over time (past and future) than the dollar to steel ratio, and the changes should be positively correlated: steel moves up when gold moves up, steel goes down when gold goes down, and by similar amounts. You can even perform the correlation exercise with pairs of mundane commodities: maybe it turns out that sulfuric acid tracks other commodity prices more closely than dollars or gold, and cautious savers should actually clamor for an acid-backed store of value.

Even without running the exercise over a full century of data -- which I don't have to hand, alas, else I would have -- I don't think gold is going to perform too spectacularly. The tremendous gold price volatility around 1980 was not, so far as I know, reflected nearly to the same degree in mundane commodities like coal and wool. It may well be that gold holds its value better over long periods if you smooth the time series, but people can't (directly) trade in smoothed time series: someone who decided to convert all their saved dollars (or steel, coal, wool...) to gold in July 1980 would have taken a heavy loss only a year later and would have needed to wait 10+ years to recover anything like their previous holdings, converting back from gold to useful commodities. The same specious arguments (scarcity, durability) sometimes advanced now to justify an irreversible value increase for gold were being touted just a few years ago about real estate. Value is always relative.

Let's get back to silver dimes and silver as a value store for a moment. Mercury is rarer in the Earth's crust than silver, it's been known since antiquity, it's shiny and dense, it can be neither created nor destroyed, and supplies and production rate from mining are limited. It even has more desirable properties for commerce: since it's a liquid at room temperature, it can be subdivided for any transaction as needed, down to the limits of the traders' scales. So why do the traditional coinage metals have their privileged position, if (as sometimes claimed) precious metals are "natural" monetary standards rather than reflections of human psychology and historical inertia? Despite all these wonderful attributes of mercury which should make it equally or more precious than silver, it currently trades at less than 5% of silver's price, and no nation has ever backed its paper notes with mercury.

Very well summarized.  I wasn't going to bother typing up something that extensive because, as you can see above me, the majority of these guys aren't interested in reality.