Re: Head In The Clouds, Part 3

2008-2-22 03:42:00

Blayne quoting JJ from a previous message writes:

"There is no money that can be issued that doesn't take good judgement to manage. Even adjusted to inflation the price of gold has been on a roller coaster of value as related to what it can buy in goods and services. For instance gold fell in value from $600 an ounce in 1980 to $300 in 1982. Within a period of only two years gold lost half of its purchasing power. People who had gold in their basement lost a lot more than those who had fiat money in their mattress. The opposite is occurring today."

Blayne then writes:

"This statement alone proves you have no idea what your talking about. The value of the gold never changed, only the arbitrary amount of pieces of paper it took to represent the value of the gold based on deflation or inflation. The gold would still purchase the same amount of goods and services it always did despite the prices in fiat currency of those services adjusted on the rate of inflation or deflation."

JJ:

My statement was 100 percent accurate. Let us suppose you bought an ounce of gold in 1980 for $600 and kept in until 1982. At this time you found you had to use this ounce to buy some product. Now your ounce of gold is worth only $300 in 1982 dollars which, adjusted to inflation, is equal to $351. Because you can only buy $351 worth of product from a $600 investment this means you lost $249. $300 in 1982 just did not purchase what $600 did in 1980.

I don't see any way you can argue with this. My point that gold varies in value is historically accurate.

Example in 1911 the price of a Colt 45 was roughly a 20 dollar gold piece or one ounce of gold. In the 80's you cite gold was worth roughly 300 an ounce. So what was the price of a 1911 Colt 45 at that time? Roughly about 300 fiat dollars. So even though the price went up in fiat dollars requiring more of them the same mount of gold was required as it was in 1911 it held its value.

You would have thought the price would have come down since the Colt takes fewer man hours to make thanks to modern mass production techniques.

There's no argument that gold will retain a reasonable value over a period of time, but it is not without its fluctuations. Like I said from 1980 to 1982 it dropped 50 percent in value. Then last year alone the price fluctuated $244 in value.

Then there's always the possibility that scientists will learn to create gold or mining will become more efficient. Then maybe a great gold discovery like the prophesied Dream Mine would come in creating a glut in the gold market altering its market value.

I believe that labor is the most reliable standard that could ever be contrived for a person's labor will always have reasonable value and will always be needed.