The Gold Standard and the Real Inflation

In this post i will write on the Real Inflation and how it is related to The Gold Standard.

 

One of the long-standing myths about modern currency is that it is backed by the U.S. gold supply in Fort Knox. That is, you can trade your greenback dollars to the U.S. government for the equivalent amount of gold bullion at any time.

 

At one point, this was true of most paper currencies in the world. However, the U.S. took away the government backing of the dollar with an actual gold supply (known as Leaving the Gold Standard) in1971, and every major international currency has followed suit.

The obvious question is, “Without gold, what does guarantee the value of our money?” The answer is: nothing at all.

The only reason a dollar, or a franc, or a euro has any value is because we have a stable system in which people are known to accept these pieces of paper in return for something valuable. Or, as Nobel Prize – winning economist Milton Friedman puts it, “the pieces of green paper have value because everybody thinks they have value.”

 

Now, after we have understood what is the gold standard let see the gold price in dollars over the last past 10 years…

 

 

Interesting… as we have seen in this graph from the begin of 2008 the gold price is in an one direction – up, except to an one big correction. It shows that the gold price has gained about 200% in 10 years !

 

Moreover, this number is mostly saying that our real inflation (Not the government manipulated statistics) in the last 10 years is about 200%.

 

Now, let suppose that i have invested my 1000$ about 10 years ago in a saving account, which gives me about 5% in a year (5% is a very good saving account). So, it is simple to calculate that i have lose more than my half of my money value to the inflation !

Now, you may be think that this is our way of life… our value of money is always being devalued to the inflation… 🙁 well, this is partly true, it depends who are losing the value of their money… in general, they are people, who are hard working and saving their money in the bank (in a very good saving account), not the rich !!!