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Lionel:
You had indicated an interest in the Gold price under a Coin Standard.
Now that Gold has been thoroughly discredited as an intelligent response to
declining standards of productivity and family prosperity in the very
advanced western civilized nations, and some remnants of mother empire in
Oceania,and the tip of southern Africa; by the heavy bullion sales noted
recently; it is worthwhile to remember that governments rarely pick the
right time to make trades.
It is unfortunate that western governments have the ability to give up gold
for paper currency, but that is the way of Fiat Reserve banking.
Americans have gone through paper money at least two times already; 18th
century and 19th century. if there is a next time, let's say in the late
20th or early 21st century, one of the conditions will be the same. That
is the fact that FR notes will become worthless.
Once it becomes obvious that a government, or legislature (as in the case of
the U.S.) is serious about establishing a commodity standard, markets will
rush to discount the value of FR notes in precious metals. In othera words
gold and silver will rise as it becomes known that they, and not FR notes
will soon become legal tender.
All the formulae and estimates will not determine the extent of price rise
in precious metals, as only one aspect is monetary; the rest is emotion,
and practical economics (as substitutes for industrial use analysis is
brought into play).
By using the technique of dividing all hard currency in print by world gold
supply, just because the numbers are available and it is easy to calculate,
does not mean, necessarily, that it will be the accurate estimate.
In fact, no estimate will likely have any bearing three days after the
announcement, as markets will be locked limit up for the forseable future.
Perhaps owning gold and silver stocks will even be too volatile to consider.
Establishing your own joint venture in a mining operation might be a good
idea if you are interested, and think you know what you are doing.
But, as you can see; there is no hurry. Everyone believes gold is useless,
and is going down forever; especially the big shot internationalist types,
who are recommending these massive gold sales by otherwise intelligent peoples.
But my arithmetic is correct, except for the statement about carrying the
extra 2 to 3% discount for inflation back to 1913, which was not clear; and
not accurate if understood this way.
If we added an extra 2 1/2% to the official inflation rate (GNP
deflator...what a hubristic euphonym) all the way back the 84 years to 1913
we come up with a dollar worth only about 1/3rd of a cent, rather than the
approximate one full cent if you used the official rate from 1967.
Again, guessing the effect a Coin standard would have on current prices is
still interesting. For example, your everyday commodities such as bread and
milk, eggs , apples, carrots, beans and whiskey should revert to their
average price levels in the early 19th or even 18th century; before either
one of the paper currency periods.
I don't recall seeing a list of these prices recently, but from what I can
remember bread was about 5 cents a loaf. Therefore you will be able to buy
20 loaves with a Silver dollar on a Silver dollar standard. If a silver
ounce today, or tomorrow, is worth around $5, the your bread is available at
$5 divided by 20 = 25 cents a loaf in yesterday's money.
This is hard to understand in terms of an overnite switchover; but that is
probably not the best way to think of it. Rather, there will be a
speculation in prices followed by a leveling off of metals prices,
contributing to a stable hard currency Silver dollar standard.
Prices will decline substantially where production is efficient, as the
value of coin will go up in your pocket.
There are those who will promote the public policy changes that will put
this standard in place. Some may want to wish them well.
Mike
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