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Author Topic: Today Marks 40th Anniversary of the Dollar’s Divorce from Gold  (Read 678 times)
Kermee
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August 15, 2011, 09:06:16 PM
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http://finance.yahoo.com/news/Today-Marks-40th-Anniversary-wscheats-1950132810.html

Some interesting tidbits:

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As is well known now, though the dollar bought roughly 1/35th of an ounce of gold in 1971, today it buys less than 1/1750th. It gets interesting, however, when we notice just how little some things have changed in the last forty years.

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Indeed, as Brookes calculated in his essential book The Economy In Mind, “In 1970 an ounce of gold ($35) would buy 15 barrels of OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl).” Fast forward to the present, and an ounce of gold ($1750) buys roughly 20 barrels of oil ($85), but given the historical reversion to a 1/15 gold/oil ratio, it’s not a reach to suggest that oil is due for a spike upward to roughly $116/bbl assuming gold remains where it is.

Thoughts, comments, debate on some of the points in the article?  I found it interesting how closely 'oil' follows 'gold'...

Cheers,
Kermee

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1.21gigawatts
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August 15, 2011, 09:20:26 PM
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hit’s not a reach to suggest that oil is due for a spike upward to roughly $116/bbl assuming gold remains where it is.[/i]

It's also possible that gold is due for a correction and will drop back down to 1/15 ratio assuming oil remains where it is
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August 15, 2011, 09:30:07 PM
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I think it's very smart to show the gold/dollar price expressed as "a dollar buys 1/1750th of gold"... it more clearly demonstrates that the value of gold is not rising, but rather the value of the dollar is falling. Throughout history, gold has held a remarkable steadiness in terms of purchasing power. Conversely, the USD has lost 97% of its purchasing power since 1913 when the Fed was created... and much of that occuring after 1971 when it was fully delinked from gold.

tl;dr - dollars suck
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August 17, 2011, 02:11:44 AM
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Isn't that the truth.

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Kermee
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August 17, 2011, 02:13:36 AM
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tl;dr - dollars suck

QFT

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Kermee

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