1 ounce of gold best suitable as stable moneyIn 1971 the minimum wage in the US
was $1.60 per hour, the price of gold
was $40.62 per ounce. This meant it took 25.4 hours of labour to earn 1 ounce of gold. In 2014 the minimum wage is $7.25 and the price of gold is $1350. Now it takes 186 hours to earn 1 ounce of gold. Keynesians would say; so what, gold is useless. I would say it’s not useless, in fact for thousands of years it proved best suitable as stable money (next to its exceptional properties as a metal).
But let’s have a look at something
we can eat: a loaf of bread. In 1971 the average price of one loaf of bread
was $0.25, or
0.16 hours of labour. In 2014, even with automation and scaling, one loaf of bread
costs $2, or
0.28 hours of labour. It now takes more labour to earn a loaf of bread; labour has devalued.
By abandoning the gold standard the debt/inflation spiral has widened the gap between the rich and poor, wiping out the purchasing power of the middle class. Perpetual inflation, caused by printing money, drives all wealth to the top. The ones that can spent newly printed money first, in a market where prices are not yet influenced by the new money, have an advantage over the ones that can spent this money last, in a market where prices have been bid upwards.
30 years ago the income of a Dutch bus driver could buy him a house, let his wife raise two kids and go on a holiday once a year. Those days are long gone…
Just some thoughts, maybe shared by some Chinese as they buy physical gold as much as can be supplied.