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| Thinking in terms of ratios is the correct way.
Everyone is programmed to think in $$ as the measure of wealth. That there is the mistake. Wealth is assets, not $$. It's why people can't figure out that if their land went from $10,000 to $30,000, that they may very well have gone backwards in wealth. Actually they stayed the same - it is still the same piece of land, the currency has lost 3x its value.
So one has to think in terms of ratios of one asset to another to properly assess if one asset is weaker or not compared to another.
Gold is an asset, a more liquid one than land. Much easier to sell gold in a pinch and then re acquire 6 months later then sell land and buy back when funds allow.
So the proper way is to look at how much gold bought 40 acres of land in some previous year and compare to now. If it took roughly 40 oz then and again now then there is no distortion. If it takes more gold now then gold is undervalued. Do same for an average house 50 years ago to today and how many ozs of gold then and now, I expect it is fairly close.
The value of the dollar is being constantly destroyed. But the dollar is not the thing of value, not since gold standard was removed. You don't hold something of decreasing value that is built into the system and then turn around and say it is the thing of value to do all measurements. You just don't do that, why would you. But that is exactly what people do, they use the $$ as measure of wealth even though they know for a fact the value of the $$ is constantly destroyed by the nature of the system.
So don't do the comparison of gold to other assets using simply $$.
Do the comparison of assets like gold, land, real estate by doing ratios. What one asset traded for another is.
The dollar is just the unit of exchange. Sell land and buy a house. Destruction of the $$ value does not matter as you are selling one asset and buying another using currency as unit of exchange. The wealth is the land and the house, not the dollar.
As soon as anyone starts putting the dollar as the item of wealth when saying gold was $200 then and $3500 now they already have it backwards. Gold is the wealth, the dollar is a unit to make it convenient to exchange one asset for another.
Grain is an asset but harder to work with over a historical perspective. Efficiency gains over decades and market dynamics don't make it an easy conversion. | |
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Gold is on a tear
