"But perhaps the biggest factor has been largely overlooked: the decline in the value of the dollar. Since 2001 the dollar price of oil and gold have run in almost perfect tandem. ... The gold price has risen 239% since 2001, while oil has risen 267% This means that if the dollar had remained 'as good as gold' since 2001, oil today would be selling at about $30 a barrel, not $99. Gold has traditionally been a rough proxy for the price level, so the decline of the dollar against gold and oil suggests a U.S. monetary that is supplying too many dollars", WSJ, 4 January 2008.
Amen. "Oil and the Dollar" was the WSJ's title for its editorial. See also my 24 October and 8 November 2007 posts. We can look at other "staples" price changes since 1957. I present some 1957 and current prices, and their percentage of 1957 prices so we can see what's happened:
Superman comic book, $0.10; $2.29; percentage of 1957 price: 2290.
Hostess cup cake, $0.10; $1.39; 1390.
Pizza slice, $0.15; $2.75; 1833.
Gold, $35, $863; 2466.
Gasoline regular gallon, $0.24, $2.97; 1238.
Candy bar, $0.05; $0.75; 1500.
Newspaper, $0.05; $0.75; 1500.
House, $14,000; $225,000; 1607.
Small paperback book, $0.35; $6.99; 1997.
Silver ounce, $0.90; $15.30; 1700.
Copper pound, $0.29; $3.12; 1076.
NYC subway ride, $0.15; $2.00; 1333.
Crude oil, $3.06; $99.42; 3249.
Postage stamp-letter, $0.03; $0.41; 1367.
Wheat, $2.01; $9.31; 463.
Corn, $1.11; $4.48; 404.
Hot dog, $0.20; $3.00; 1500.
While oil may seem high to us and is 32.49 times its 1957 dollar price, it is only 2.17 times (3249 / 1500) its 1957 hot dog price, or 2.38 (3249 / 1367) times its 1957 postage stamp price, etc.. Suddenly oil's "price" doesn't look that high. We only think oil is "high" because we have been conditioned to think in dollars as opposed to say: pizza slices or hostess twinkies! See also my 19 November post.
Amen. "Oil and the Dollar" was the WSJ's title for its editorial. See also my 24 October and 8 November 2007 posts. We can look at other "staples" price changes since 1957. I present some 1957 and current prices, and their percentage of 1957 prices so we can see what's happened:
Superman comic book, $0.10; $2.29; percentage of 1957 price: 2290.
Hostess cup cake, $0.10; $1.39; 1390.
Pizza slice, $0.15; $2.75; 1833.
Gold, $35, $863; 2466.
Gasoline regular gallon, $0.24, $2.97; 1238.
Candy bar, $0.05; $0.75; 1500.
Newspaper, $0.05; $0.75; 1500.
House, $14,000; $225,000; 1607.
Small paperback book, $0.35; $6.99; 1997.
Silver ounce, $0.90; $15.30; 1700.
Copper pound, $0.29; $3.12; 1076.
NYC subway ride, $0.15; $2.00; 1333.
Crude oil, $3.06; $99.42; 3249.
Postage stamp-letter, $0.03; $0.41; 1367.
Wheat, $2.01; $9.31; 463.
Corn, $1.11; $4.48; 404.
Hot dog, $0.20; $3.00; 1500.
While oil may seem high to us and is 32.49 times its 1957 dollar price, it is only 2.17 times (3249 / 1500) its 1957 hot dog price, or 2.38 (3249 / 1367) times its 1957 postage stamp price, etc.. Suddenly oil's "price" doesn't look that high. We only think oil is "high" because we have been conditioned to think in dollars as opposed to say: pizza slices or hostess twinkies! See also my 19 November post.
2 comments:
GW --- Hallelujah, amen! As much as things change, they remain the same. Assuming no calamity in the supply and demand of any particular commodity (including income), historical data indicates for all commodities that their relative values are very constant over time --- HDF
HDF:
They are relatively stable. That's a reason we need commodity-based money. While no "completely" stable commodity exists with respect to any "general price level" index, gold has proven to be the most stable over the last 5000 years.
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