Sunday, April 29, 2018

Over the past 100 years the purchasing power of gold today is nearly three times greater than the dollar when modified for inflation

Many people have seen the charts that show the fact that ever since the U.S. adopted a private central bank back in 1913, the purchasing power of the dollar has lost between 96 and 98% of its value 104 years later.


Meanwhile, there has only been one asset that has not only held its purchasing power over that time, but in fact appears to have exceeded the global reserve currency by a rate of 267%.  And that asset of course is gold.

If you were to hold $1,000,000 in U.S. currency in 1913 at the advent of the Federal Reserve, your purchasing power would have been exactly what you held in cash.  And this was primarily because the dollar was tied to gold at the moment of the central bank's introduction to the monetary system.

Also in 1913, gold was valued at $20.67.  So $1,000,000 in gold would equate to owning 48,379 ounces.

Fast forward to 2017.

Because of the fact that the dollar began to devalue almost immediately after the Federal Reserve was created, the Bureau of Labor Statistics has estimated that the average amount of inflation per year comes out to 3.13%.  So if we were to take this number and engineer it into a purchasing power model, the amount of dollars one would need today to have the same purchasing power they did in 1913 would be:

1913:  $1,000,000
2017:  $24,725,858


Now let's take a look at gold, and what its purchasing power would be if you had held $1,000,000 in bullion rather than dollars/Federal Reserve notes.

1913:  48,279 ounces at $20.67 = $1,000,000
2017:  48,270 ounces at $1324  (Today's currency gold spot price) = $64,054,184

So not only did gold hold onto its purchasing power in relation to the dollar over the past 104 years, but it actually provides you 267% more.

In fact this amount of purchasing power for gold is probably even lower than it should be due to the fact that the gold price is manipulated and suppressed in the paper markets that currently determines the spot price.

So in the end, perhaps those that vilify gold under the auspices that it doesn't provide a 'yield' like stocks and bonds do never actually look at the fact that gold is money, and is better comparable to purchasing power versus accumulation.  Because you would need 24 times the amount of dollars you had in 1913 to buy the same amount of goods, but you wouldn't even have to have acquired a single additional ounce to be able to purchase nearly 3 times the amount of goods over that same period of time.

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