Section16cattleco’s Blog

This is an article my good buddy Bryan Lutter wrote about what the purchasing power of gold has been over time. Bryan is a very smart fella and very entertaining. I encourage you to check out his website for more of his articles. There is a link to his website in my blogroll.  Hope you enjoy!!!

Erik

Written By Brian Lutter

(This story was written in 2006 for pricing referance) 

Isn’t it weird how in the last 50 years the price of everything stayed the same? I’d thought the price of fuel went up since 1967, but it HAS NOT! Back then diesel fuel brought the same money or more than it does now. The guy at the station wanted $0.17/gallon, but if you gave him one ounce of gold, which was worth $35, you got yourself 205 gallons of diesel. Today that same ounce of gold is worth $635 as I write this, so if you traded your ounce of gold for 205 gallons of diesel fuel, you’d have $3.10 into each gallon.

Let’s look at tractors. In 1967 a brand-new 84 horse-power International Harvester 706 tractor brought $8,400. That’s a lot of gold!! As a matter of fact it took 240 oz of $35/oz 1967 gold. Gee, here we are in 2007, and gold is $635. If one were to drop 240 oz gold on a brand new top of the line tractor today you’d shell out $152,400 for it! (For you folks not in Ag, that’s the exact price of a new tractor)

In 1941 one bar of Palmolive soap brought $0.03. In 1941 your ounce of gold brought $35. So if you went nuts buying soap with an oz of gold you’d buy yourself 1,166 bars of soap, enough to last the country of Pakistan 28 years at current use rates. If you traded that same oz of gold today for 1,166 bars of soap you’d wind up paying $0.54 per bar.

This one blows my mind;

In Medieval England, in the year 1532, one oz of gold bought 320 quarts of beer. If you traded that same oz for 320 quarts of beer today, you’d get stuck paying, GET THIS, $1.98 per quart. That’s 6 cents per oz, times 12 oz can, times a 24 can case, = $17.86 for a case of beer.

I attended college at SDSU in 1993. One 24- pack case of Bush Light sold for $11.23 in them glory days. Gold brought $390 an ounce at that same time. So I could have traded one oz of gold for a week’s worth… err I meant 34 cases of Busch Light. If I exchanged that exact same oz of gold for 34 cases of Busch Light today, I’d get yelled at by Hillary. I’d also have $18.68 into each case. It’s good to know beer hasn’t gotten any more expensive in the last 600 years.

How about land? I dug and dug until I found some information on land sales in the City of Rome in the year 1, (As in 1 A.D.) I discovered that it took 43 oz of gold to buy one Jugerum, (5/8 of an acre) in downtown Rome. I have zero clue what the Pope gets for his downtown Rome real estate today, but if you dropped 36 oz of gold on a 0.63 acre lot today you’d cough up $27,305.

The Average price of farmland in Iowa in 1970 was $320, while gold traded for $35 per oz. That’s 12 oz of gold, which is $5,805 in today’s money. Some farmland a few miles from Woonsocket, SD brought $100 per acre in 1970. That’s 2.86 oz of gold or in today’s money, $1,814.

Now let’s look at some farm commodity prices. The year 300 A.D. found Romans trading 100 Denarii’s to buy a single Modius of wheat! Now for you folks who don’t price your wheat by the denary, and don’t measure it with a modius flask, here’s how it works;

2,400 denarii’s = 1 aurius

1 aurius = 8 grams of gold

8 grams = 0.28 oz

1 modius = 8 liters

35.28 liters = 1 bushel

That makes that bushel of wheat worth $32.67. What a time to be a farmer!

In 1532 one ounce of gold bought 220 bushels of oats. Keep in mind that gold trades for $635 today. So if you traded an oz of gold for 220 bushel oats, you’d be out $2.89/bushel.

There are several interesting lessons here. One is that gold, “Nature’s Money”, is a better yardstick to gauge prices than US dollars. When the guy on TV tells you the stock market went up 15% last year, he never tells you that the supply of money created by the US Fed Reserve printing press went up 20% which of course sent the price of gold up 20%. People feel like their investment did well, but in real terms, they got poorer.

I love to hear economists attempt to explain that in 2006 people spent more than they made for the first time since the great depression. This means a net negative savings. How is it possible that the government tells us that inflation is tame, savings are an all time low, yet the economy is booming? GDP growth is growing, but not as much as the money supply according to many economists and according to the price of gold.

Anyhow, if you’re extremely bored and want to compare historical prices, here’s just a few of the over 100 websites I used;

http://homepage.mac.com/jeremybaker/towerhills/Resources/Roman%20prices.pdf

http://www.xanderancients.com/forum/viewtopic.php?p=25

http://www.ex.ac.uk/~RDavies/arian/current/howmuch.html

http://www.fordham.edu/halsall/source/medievalprices.html