And it has been!

The Coffee Chart shows a remarkably stable price since 2002, generally hovering in the area of 50 mg/lb. In 2005 the price almost doubled, peaking at 95.8 on March 17, but by December had fallen back to the mid-50s. Since 2006, the price of coffee has been gradually working it's way lower, putting in a recent low of 33.3 on June 8 and ending June at 41.

Coffee futures are quoted in USD, in the form of cents per pound. In 2002, the USD's value was about 100 mg of gold, making 1mg roughly equal to 1 US cent. For instance, on May 17, 2002, the price of coffee was 48.47 mg/lb or 48.40 cents/lb. But what a difference 8 years makes! Although coffee prices ended June 2010 at 41.055 mg/lb, down 15% from the May 2002 price, the "fun-house mirror" USD price ended June at 164.20, apparently up 239%.

Keep in mind that a pound of coffee is still a pound of coffee, and can be roasted and ground up to brew the same number of cups in 2010 as in 2002. A gram of gold is still a gram of gold, and can make the same fillings, or jewelry, or plate the same number of electrical contacts in 2010 as in 2002. In 2010 there is a slight shift in preference in favor of gold over coffee, but we're talking about 15%.

The US Dollar, on the other hand, has lost about 75% of it's purchasing power over the same time period, that is, it takes $4 today to buy what $1 bought in 2002. Holding onto dollars is playing with lighted matches! And measuring your investment performance in dollars virtually guarantees that you will have a mistaken impression of how well you are doing, and will make it virtually impossible to accurately judge when to buy and when to sell.

Don't be fooled! Always price in gold!

Even though I missed only a few of the general sessions, I can't wait to get my hands on the recordings to go through them again for profitable ideas, and to clarify in my own mind the arguments, pro and con, on issues that will be key to my investment decisions in the coming months.

One of those "out in the hallway" discussions got me to thinking about wages, valued in gold… and I put together a chart of wages (average hourly earnings of US production workers, as tabulated by the BLS in series CES0500000008, to be precise) to see what they've been doing.

I was shocked to see that since January 1964, a total of 534 months, there have been only 36 months in which wages were lower than they are today – mainly in the period from 1979-1981. The most recent period when they were this low was early in 1988, 20 years ago. Since then they have seen a high of 1.75 grams/hour in April of 2001, before falling back to their current level of 0.6 grams/hour in July of 2008.

I thought it would be fun to take a look at how things have changed over that 20 year period in terms of gold prices, many of which can be found in the charts section of this web site. Here is a summary:

1) Although wages are about the same, per capita disposable income is up 9%. I suspect this is due to many factors, including lower tax rates, changes in government "benefits", more dual earner households and smaller families. It could also be influenced by the proportion of "production" jobs in the economy. In any event, this is a modest increase for 20 years!

2) First class postage is down 6%, one of the few things I could find that was down!

3) Stocks were a mixed bag. The Dow Jones Industrials are around 400 now, up from about 125 in 1988 – a rise of 220%, even after their spectacular fall from the 1999 high of 1,400. What a roller-coaster ride! On the other hand, Japanese stocks as measured by the Nikkei 225 Index were much stronger in 1988, and have fallen from 12 to 4.5 – a drop of 63%. I plan to do a more detailed comparison of these markets in a future post.

4) Home prices, as measured by the Case-Shiller CSXR Index, are up about 33%, even after falling more than 50% over the last three years.

5) Commodities are up strongly: silver up 29%, gasoline up 89%, copper up 98%, crude oil up 275%, and wheat up a whopping 347%.

The US government's own debt is also a huge and growing problem. While in 1988 it was a "mere" 2.6 trillion USD, today it is over 9.4 trillion USD, up 262%. If this debt had to be settled in gold, that would require 308,376 tonnes of gold today, up from 204,000 back in 1988. It's a good thing that this debt is denominated in US Dollars that can be created out of nothing with the press of a few computer keys! There are only 8,133 tonnes of gold in the US reserves (even this figure is disputed, as it has not been physically audited for decades.) And to put the size of this debt in perspective, all the gold ever mined, since the beginning of time, is estimated at about 150,000 tonnes – that's less than half of the current US Federal debt.

But these figures, as grotesque and gargantuan as they are, are just the officially acknowledged tip of the iceberg. They don't include off-budget borrowing, consumer borrowing, or the real elephants in the room, the ones no one in polite society wants to talk about – the "unfunded liabilities" and future entitlements of social security, medicare, and related programs. While current taxes are generating enough cash to cover these at the moment, due to changing demographics they are growing at a rate that cannot be met simply by new tax increases. Unless changes are made, their costs will overwhelm even the ability of our printing presses to pay for them!

How did we get to this point? What can we do about it?

At the Vancouver Symposium there was a showing of a new documentary film called I.O.U.S.A. that addresses many of these points via fascinating interviews with Pete Peterson, Warren Buffett, former Comptroller General of the United States David Walker, and other luminaries. It's a wonderful film, well made, very thought-provoking, and highly recommended.

Most people have little grasp of what is happening with their money. Most have no idea what is heading down the tracks toward them financially. If you have family and friends in this situation, I urge you to take them to see this movie. It is fun, fast paced and informative. They may be shocked, but they won't be bored!

There will be a special "one day only" premier showing of the film all over the USA on Thursday, August 21st. I'm going, along with many of my friends who weren't able to see it in Vancouver. You can get details, watch a trailer and check out the special offer Agora Financial is making to those who pre-purchase tickets, as well.

I hope you will join me!

I'm preparing a special report on how to do these calculations, and shortcuts that make it easy to translate anything you're reading from "dollarese" into language that you can understand and act upon.

As you read the examples below, you'll see that some numbers are more or less unchanged. These involve time periods where the value of the dollar is pretty stable, as it usually is from day to day, or where it has made an excursion up or down in value and ended at about the same level as at the beginning of the period.

You will also see some cases where the change in value is dramatically larger than the dollar figures would suggest. These are usually cases where the declining value of the dollar is adding to the decline in the value being reported. Of course, a rising dollar would also add to the increase in value of an asset or security.

And then, there are cases where measuring in gold completely reverses the meaning of the statistics being given in dollars – these are the fun ones!

Ready to explore the world from a new perspective? Great! Here we go!

Excerpts from a bank press release:

SANTA PAULA, Calif., Mar 07, 2008 (BUSINESS WIRE) — Santa Clara Valley Bank (SCVBank) (SCVE) today announced its 2007 fourth quarter and year-end financial results.

Stated in dollars:

The Bank reported that quarterly revenue was $1,970,000 in the fourth quarter, an increase of 9.4%, or $170,000 over the $1,800,000 of revenue in the fourth quarter of 2006. The Bank's fourth quarter net income of $174,000 was up from $118,000 in the fourth quarter 2006, an increase of 47%.

Stated in gold:

The Bank reported that quarterly revenue was 73.25 kg of gold in the fourth quarter, a decrease of 16.6%, or 14.82 kg less than the 88.07 kg of revenue in the fourth quarter of 2006. Despite this revenue reduction, the Bank's fourth quarter net income of 6.47 kg was up from 5.77 kg in the fourth quarter 2006, an increase of 12%.

Excerpts from a report on stock declines

U.S. stocks decline as jobs drop points to recession
Nasdaq, S&P down more than 2% for week; Dow ends with weekly loss of 3%

Stated in dollars:

The Dow Jones Industrial Average ($INDU 11,893.69, -145.23, -1.2%) declined 146.70 points to 11,893.69, giving it a weekly loss of 3%. Since the year began, the blue-chip index has lost more than 1,370 points, declining 10% in value.

On the New York Mercantile Exchange, gold futures swung between gains and losses after the government reported the jobs data, with gold for April delivery falling $2.90 to end at $974.20 an ounce.

Elsewhere on the NYME, crude-oil futures edged lower, with crude for April delivery down 32 cents to settle at $105.15 a barrel.

Stated in gold:

U.S. stocks decline as jobs drop points to recession
Nasdaq, S&P down more than 2% for week; Dow ends with weekly loss of 3%

The Dow Jones Industrial Average ($INDU 380.396 grams, -3.114 grams, -0.8%) declined 3.11 grams to 380.396, giving it a weekly loss of 3.1%. Since the year began, the blue-chip index has lost more than 112 grams, declining 23% in value.

On the New York Mercantile Exchange, US dollar futures swung between gains and losses after the government reported the jobs data, with dollars for April delivery rising 0.3% to end at 31.927 milligrams of gold. So far this year, the US Dollar has lost 14% of it's value.

Elsewhere on the NYME, crude-oil futures edged lower, with crude for April delivery down 0.1% to settle at 3.363 gold grams a barrel. So far this year, April crude has fallen 5%, from 3.541 gold grams per barrel at the close of 2007.

Excerpts from an article on food costs:

Stated in dollars:

Rising costs move down the food chain

SAN FRANCISCO (MarketWatch) — The soaring cost of grains, dairy products and other edible commodities continues to pile up on consumers as producers seek to dull the impact of higher prices on their own bottom lines, according to scanner data from U.S. supermarkets.

What are shoppers paying more for?

According to Citigroup, which based its research on AC Nielsen data, food categories with the biggest price spikes for the 12 weeks ended Feb. 23 were:

• Cheese, up 14.1%
• Yogurt, up 8.3%
• Ground coffee, up 7.1%
• Frozen pizza, up 5.5%

Stated in gold:

Falling food costs thrill savvy shoppers

SAN FRANCISCO (MarketWatch/PricedInGold) — Despite the higher dollar prices marked on supermarket shelves, smart shoppers realize that it takes a lot less of their gold to buy groceries than it used to, according to scanner data from U.S. supermarkets.

How much are shoppers saving?

According to Citigroup, which based its research on AC Nielsen data, food categories with the smallest price drops for the 12 weeks ended Feb. 23 were:

• Cheese, down 5.2%
• Yogurt, down 10.0%
• Ground coffee, down 11.0%
• Frozen pizza, down 12.3%

Prices in other categories were down even more!

A final thought

Remember that the US Dollar (and indeed, all modern fiat currencies) are subject to change in value without notice. And they DO, every day! Holding your assets in one of these currencies is extremely risky… not something for widows and orphans, or even normal investors. It's a game for speculators and gamblers. Even a US Treasury bill, touted as the safest investment you can own, only pledges that the "full faith and credit" of the US Government will be used to give you back your US Dollars, NOT that those dollars will buy much when you get them.

So don't be fooled – price your investments (and your news!) in gold.