In the post of March 11th, Big Day on Wall Street, I restated a Financial Times news story in gold terms but neglected to translate the Fed's bailout price of $200bn… When I went to make the correction, I was stunned!
You might have noticed that my previous post on Silver and Stocks didn't once mention the US Dollar. Why? Because it's irrelevant. It may go up, it may go down. Most likely down, but so what? I try not to hold any more of it than necessary, unless I have reason to believe it's in an extended uptrend and decide to speculate.
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I realized yesterday that it is easy to calculate the price of an ounce of silver in gold grams if you know the gold-silver ratio (Duh!) You just divide the ratio into 31.1035 (the number of grams in an ounce.) And the ratio is well documented throughout much of history. For instance, the website Measuring Worth provides annual values for the gold-silver ratio going back to 1687. I've used this data to create a new long term chart showing the price of silver from 1700 to today, and added it to the Silver chart page.
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So what? It used to take about twenty US Dollars to buy an ounce of gold. Now it takes over a thousand of them.
That ounce of gold hasn't changed one bit. In fact, an ounce of gold is still an ounce of gold, just as it has been for thousands of years. It can be used to make the same amount of jewelry, it can be beaten out into the same amount of gold leaf, it can plate the same amount of wire, and in general, can be exchanged for about the same amount of other goods and services as it always could. It buys much more of many items than it used to, thanks to global trade, the productivity improvements of automation and the wonders of Moore's Law.
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Another fun look at the news, without the distorting effects of the US Dollar. For context, be sure to check out the charts on crude oil and gasoline.
From a March 11, 2008 story in the Associated Press:
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Another story that caught my fancy, restated in terms of gold for your entertainment. Enjoy!
From a March 11, 2008 story in the Financial Times:
As stated in dollars:
Wall St enjoys best one-day rise since 2002
By Chris Bryant in New York
Published: March 11 2008 13:01 | Last updated: March 11 2008 20:41
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Here are excerpts from three news stories from 7-Mar-2008 Marketwatch.com, as they were written, and as I would read them. In each case, I have simply taken the USD figures given in the story and converted them to gold grams, then reworded the story to fit the new numbers. In some cases, I've added YTD data to put the reported figures in a larger perspective.
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I've added a new chart to the US Home Prices page. The Case-Shiller Home Price Index is calculated on a monthly basis by Standard and Poors, using a sophisticated algorithm. Several major markets are tracked and then combined into an overall composite index.
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With the US Dollar making new lows, and the stock market in disarray, 2008 is off to a shaky start. The Fed is faced with few options, none of them very pretty. If they cut rates to try to soften the recession and prop up asset prices, they further lower the value of the currency those assets are priced in, hurting their true value. But the political consequences of doing the right thing – letting a recession wring the weakness out of the economy – are just too painful to seriously contemplate, especially in a presidential election year.
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