February 2011

[Our correspondent and occasional guest essayist Erich Simon has been talking up gold for as long as he can remember. Recently, however, after working some comparison numbers based on grocery bills we would have paid 40 years ago, he discovered that gold’s powerful rise was somewhat anemic before Helicopter Ben opened the money jets. He further notes that our apparent overestimation of gold’s strength is no accident – that even the most astute bullion investors have been fooled by our cunning masters.  For the full story, read his essay below. RA]

The dollar is down about 98% since it became global tender. Back in 1971, era of Nixon Shock, the price of an ounce of gold was $35 — in line with its 1945 conscription. Right after Nixon closed the gold window, the price peaked at $42. All things being equal (and assuming gold doesn’t get used up), at what price must gold be valued to compensate for a 98% loss from — call it inflation, debt or whatever you like. I think the math goes like this: One dollar is now 2% of its former self. If you divide the 1971 “fair market” price of $42 by .02, you arrive at $2,100. The price of gold (POG) is in fact now around $1,365. » Read the full article