We often hear it said that the POG [ Price Of Gold ] should be about $2,300 - $2,400 to equal the old High of $850 seen in 1980. "They" have been using these numbers for the last 5 years.
Well, about 4-5 years ago I found an article where somone took the time and used Historical Data, such as that you can find on shadowstats. The Original "Yardstick" is kept there. Imagine taking a Yardstick, cutting it in Half, and then re-applying the Inch lines to come up with this half-sized Yardstick that says 36 Inches.
So I'll add this paste I saved, and keep in mind, this is 2007 stats written in early 2008. Henneke was the first one I found, and I later found two others who came out with basically the same info. I'm putting this up now because we have arrived at a Major Point in TIME. I believe we will be seeing a POG and POSilver we won't be seeing again. Paste below of 2007 data facts, the most recent update places the POG over $8,000/USD:
Martin Hennecke, Tyche Investment
we can't believe how easily the people are fooled
just because Paulson said ''the worst is over''', bush and greenspan said that last year before all the problems emerged, trillions still have to be recognized---losses, -----beginning to look like 3rd world nation,
However, what needs to be considered is that $850 today has much less purchasing power than it did 28 years ago, as inflation erodes the value of currency over time. Adjusted for inflation, using US government inflation figures, the value of $850 in 1980 is equivalent to the value of $2,300 today. To reach a new inflation-adjusted high, the price of gold would have to rise beyond US$ 2,300 per ounce.
More importantly still, it should be noted that the US government has changed the way it calculates inflation (CPI) several times since 1980, in order to conceal how bad inflation really is.
If instead we use the same methods of calculating inflation that the US government was using up to 1980 (as calculated by shadowstats.com), it turns out that $850 in 1980 represents the purchasing power equivalent of $6,255 in 2008! And, of course, the longer it takes for gold to catch up, the higher the price would have to rise to mark a true new inflation-adjusted high, as inflation will also keep rising in the meantime...
Since, moreover, the United States' present debt-to-GDP ratio is over four times as bad as it was in 1980, US future unfunded liabilities stand at US$ 66 trillion and Helicopter Ben appears to be willingly sacrificing the dollar to bail out the banking system all of which foreshadows hyperinflation in our view gold is still cheap today, and its price should be expected to rise beyond US$ 10,000 per ounce.
Martin W Hennecke
Tyche Group Ltd
For gold to be equivalent to the 1980 high of $850 -- in real, inflation-adjusted terms -- it would have to rise to $6,030 per oz. That is a 6-fold rise from the current price.
For example, the M3 money supply (total printed money in circulation) was ~$1.7 billion in January, 1980 when gold hit $850 an ounce. Today, the M3 is estimated at $14 trillion, a 7.7 times increase in the amount of currency. With that said, gold, when it adjusts, should be $6,118.00 an ounce...
Posted Mar 5, 2008
...For gold to be equivalent to the 1980 high of $850 -- in real, inflation-adjusted terms -- it would have to rise to $6,030 per oz. That is a 6-fold rise from the current price.
There are not many things changing hands at 16% of the inflation-adjusted price, but this is the current situation in gold. This is why the current bull market will send gold prices into the stratosphere, far beyond what even the wildest bulls are predicting now.
The Consumer Price Index (CPI) currently released by the government is worthless political propaganda, so we're not going to use it to calculate the true inflation rate. Instead we're going to use the method for calculating the CPI in place in 1980 -- the year of gold's high.
Since 1980, starting with the Reagan administration, changes have been creeping into the calculation of the CPI, mostly due to a nebulous concept known as "hedonic price theory". These methodology changes have been used by every administration since 1980, Democrats and Republicans alike. It's irresistible for those in power, because there are so many political benefits to under-reporting inflation. The foremost benefit is it gets the government out of paying true cost-of-living adjustments.