A thought worth far more than a fiat penny

Joe Huffman notes that the recent spike in gold prices doesn’t mean that value of gold has gone up, it’s just that the dollar is suddenly worth less with the latest round of “quantitative easing“. HerrBGone points out that the effective purchasing power of gold has basically remained flat for nearly 100 years.

In 1920 […] the base price of a Ford Model T was $260 (according to Wikipedia).
The dollar was backed by Gold at an exchange rate of $22 per Ounce Troy (oz/T).
So the cost of the car was 11.81 ounces Troy if paid for in gold.

The invoice price of a base 2013 Ford Fusion is $20,235  […]  Today the spot price of one ounce Troy of Gold is $1693.70 (according to Kitco).  So the cost of the car is 11.94 oz/T if paid for in Gold.

You’ll notice a slight difference in the gold price between the two cars, but then again they’re not really directly comparable – the Ford Fusion is much more complex, and requires a greater amount of materials. On the other hand, manufacturing capability and efficiency have both increased exponentially in the interval. A true direct cost comparison that accounted for these changes would be long, complex, and difficult.

But it still makes a good illustration of the effective drop in purchasing power of the dollar – the same amount of gold will buy you an average car now as would buy you an average car about 100 years ago, while the number of dollars required to do so has increased by a factor of more than 75.

Just think about it.


(h/t SayUncle)

Quote of the Day 2011-08-25

Why even successful small businesses aren’t hiring.

“Because I don’t know how much it will cost,” he explains. “How can I hire new workers today, when I don’t know how much they will cost me tomorrow?”

He refers not to wages, but to regulations. Specifically, that he has no way of knowing for certain what new regulations will go into effect when, or how existing regulations may change.

He tells me that it doesn’t much matter which party is in office. Every change of power means a whole new set of rules to which he and those like him must respond. ‘‘I don’t understand,” he continues, “why Washington won’t just get out of our way and let us hire.”

And why is the economy stagnating?

It isn’t just hiring that is too unpredictable, he says. He feels the same way about investing. He has never liked stock markets; he prefers to put cash directly into businesses he likes in return for a small stake, acting, in short, as a small- time venture capitalist.

“Can’t do that now,” he says. For people like him — people who aren’t filthy rich — it has become too hard to pick winners. But he doesn’t blame the great information advantages enjoyed by insiders. He blames Washington, once more, for creating a climate of uncertainty.

In an environment of political or regulatory uncertainty, business owners don’t invest – the risk is too great. An unanticipated change in laws or regulations can leave them bankrupt and destitute overnight. The same holds true in times of financial uncertainty. A sudden change in the value of the dollar, even a minor one, can bump costs over the point where profit – or even simply breaking even – is possible. When no one can predict what the dollar will do from one day to the next, business owners will wait to hire or invest until the situation stabilizes. Small business especially, even successful ones, tend to run with very tight margins – small changes can have a large effect on their success.

Government needs to step back and leave things alone. Let the economy stabilize on its own. Other forces, especially with current world events, are going to keep things in flux for a while, but the most the government can do is make things worse.


[Source: Bloomberg.com article by Stephen L. Carter, retrieved 2011-08-25]

(h/t Another Gun Blog)

The Won and unemployment.

Didn’t The Won©®™ promise to bring unemployment down from where it was during the elections? Looks like he’s not doing a very good job.

[T]here are more officially unemployed people in the United States (13.9 million, though if you count those who have given up looking it’s nearly twice that) than the total individual populations of 46 out of 50 U.S. states.

Or, if you prefer: There are more offically unemployed Americans than the combined population of Wyoming, Vermont, North Dakota, Alaska, South Dakota, Delaware, Montana, Rhode Island, Hawaii, Maine, New Hampshire, Idaho and the District of Columbia.

It must be Bush’s fault, or the Republicans’, or the TEA party, or something.


[Source: The Lookout Yahoo! News blog, retrieved 8/22/11]

QOTD 2011-07-22 – Even more perspective on the national debt

A good visual representation, using $100 bills, can be found here.

They also mention something else that’s really frightening, concerning the fact that we’re measuring our debt in trillions of dollars.

If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now

Think about that. If you spent a million dollars a day, every day, for over 2000 years, you would not have spent one fifteenth of the current national debt. Not the budget, just the debt.

If you’re not worried about that, you’re either delusional or not paying attention.


(h/t SayUncle)

More debt limit perspective

If I were to act like the government, I would get a bunch of credit cards to pay my mortgage, and more credit cards to pay the credit card bills, and other credit cards to pay the new credit card bills, and a new mortgage to pay all those credit card bills, which would put me at the point the .gov is at right now.

What the .gov wants to do now is the equivalent of me deciding how big a raise I want to demand from my boss while figuring out how big a second mortgage I want to get to pay my first (new) mortgage payments and the credit card bills from where I used them after paying them off with the new home-loan to buy the big-screen 3D HDTV, surround sound system, Blue-Ray 3D DVD player, X-box, PS3, laptop computer, desktop computer, netbook, and Android tablet.

Oh, and I’m going to cut back on how often I eat out, because money is tight and I really can’t afford to do that as much anymore.

Sadly, when you translate that scenario to the current .gov situation, most people don’t seem to get it.


It’s the economy, stupid!

Amazingly, a Harvard professor who gets it.

Back in March, the president of the New York Federal Reserve, William Dudley, was trying to explain to the citizens of Queens, N.Y., why they had no cause to worry about inflation. Dudley, a former chief economist at Goldman Sachs, put it this way: “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things.” Quick as a flash came a voice from the audience: “I can’t eat an iPad.”


To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump. These, after all, are the costs they encounter most frequently. And with average gas prices hitting $3.88 a gallon last week, filling up is now twice as painful as when President Obama took office.

More importantly, the prices of food and gas are the costs ordinary Americans can’t avoid. With rare exception, no one has to buy an iPad – it’s a luxury item. Food and gas are necessities, that most Americans simply cannot do without and must buy for themselves.

Go read the whole thing. It hits on several points many of us in the blogosphere have been saying for a while now.


[Source: The Daily Beast article on Yahoo! News, retreived 5/2/11]

In the tank

I’m sitting at lunch watching CNN on the restaurant’s tv, and they’re doing a story on the “hidden benefits” of the rising gas prices. They are talking about things like reduced fatalities and reduced obesity, and states getting more money from taxes.

So the fact that I have to pay more to get to work, and have that much less to spend on luxuries must be a good thing, right?

A plague o’ both your houses!

Poll finds voters’ mood on economy is grim — for both parties

Yet Americans surveyed in the first of a series of ABC News/Yahoo! News polls, released early Tuesday, have a message for both sides: Many respondents — including a clear majority of independents, who have provided the critical swing votes in many recent elections — have little confidence in either party’s ability to do more for the economy.


Neither side has convinced a majority of Americans. Fully 47% of those surveyed in the ABC/Yahoo! News poll say it won’t make a difference to the economy whether Democrats or Republicans are in control of Congress.

Even Obama supporters are losing confidence in his ability (or willingness) to do what he promised.

Saying that she is a wife, a mother, a veteran and the chief financial officer of a veterans service organization, the woman told the president: “Quite frankly, I’m exhausted. Exhausted of defending you, defending your administration, defending the man for change I voted for, and deeply disappointed with where we are right now.”

He’s also losing the independents that flocked to him in ’08 because they were disillusioned with the Republicans.

And no matter how often Obama makes the argument, his message appears far from sinking in. The unhappiness with Washington’s efforts on the economy is even more stark among independents, according to the ABC News/Yahoo! News poll. A whopping 65% of them say it won’t matter one way or the other which party is running the show.

Independents still don’t feel any better about the GOP, though.

Unhappy as many independents are with the current regime, however, that’s hardly translating into a strong belief that Republicans will do any better. Only 21% of independents think the economy has a better chance of improving if Republicans gain control of Congress.

You should read the whole thing, it’s interesting. I think the most insightful bit is this, which is also today’s Quote of the Day:

“Maybe independents have the more realistic view,” says Larry Sabato, the director of the Center for Politics at the University of Virginia. “They may recognize most of what they hear from both parties as rhetoric.”

“Rhetoric” is a more polite term than what springs to my mind, but I think he’s hit the nail on the head. Think about it, and remember it when you decide who to vote for in November.


[Source: Yahoo! News article, retrieved 9/21/10]

Surprise, surprise, surprise!

The stimulus didn’t work! No one predicted that!

The recovery is picking up steam as employers boost payrolls, but economists think the government’s stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.

Actually, it accomplished it’s purpose perfectly. It took your money and gave it to someone else, just like it was supposed to.

(h/t SayUncle)

GM pays back it’s bailout loan…

with more bailout money.

Essentially, they’ve paid off their Visa with their Mastercard, and are calling it a sign that they’re on their way to recovery. In reality, they’ve “paid back” nothing. They’ve simply moved the debt to another account held by the same bank. It’s a shell game.

Tell me again why the bailouts were a good idea?

(h/t SayUncle)

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