The real price of Gold

and how little your money is worth. Do you wonder why the economy is in collapse?

http://www.kitco.com/ind/Turk/turk_jan252008.html

Jan 25 2008 1:43PM

The "Real" Gold Price

Now that gold has climbed above the $850 high reached back in January 1980, many are proclaiming that gold is at a new ‘record’. That’s true of course when gold’s exchange rate to the dollar is viewed in terms of nominal dollars, but nominal dollars provide a distorted picture.

After all, everyone knows that because of inflation a dollar today purchases much less than it did twenty-eight years ago, so clearly, $850 today does not have the purchasing power it did back then. The question therefore arises, what price does gold have to reach in inflation adjusted dollars to equal the purchasing power of eight hundred fifty 1980-dollars?

The answer to this question depends upon which Consumer Price Index is used to calculate the inflation adjusted gold price. The two alternatives are the US government’s CPI or the CPI provided by John Williams of www.ShadowStats.com.

These two different CPI measures provide very different inflation adjusted gold prices. So which CPI should we use?

The ShadowStats CPI eliminates the changes made by the US government since the early 1980s to its own CPI measure. In other words, the ShadowsStats CPI is the same one the US government used to calculate inflation while Jimmy Carter was president.

of gold pricing.

I don't remember the exact number,s but the idea is that if it took 10 ounces of gold to buy a Model T back then, it should take 10 ounces of gold to buy a cheap Ford now. And, he noted, a good men's suit historically costs 1 ounce of gold.