Oil vs. Gold vs. USD

[Phaedrus]

Interesting chart from an article by James Truk, comparing the price of oil in USD vs. the price of oil expressed in grams of gold, from 1945 to 2004:

In other words, the parity between the two commodities has remained practically flat for over half a century.

Full commentary is here for those who are interested.

Sort of like the comparison of oil priced in USD to oil priced in Euros that I mentioned two months ago.

It's amazing just how much of any given "commodity crisis" can be attributed to the ultra-soft, weak currency that we use.


Phaedrus

 

[cussin'it]

My question is the comparison seems suspect.
The utility of gold v. that of crude oil?

Please elaborate Phad?

_________________________
Sure could use a trim

 

[SteveMcGarrett]

Phad,
Charles Givens has always said the an ounce of gold is comprable the price of a cheap suit throughout history. Are you saying that The relative price of oil has shot up when the U.S. came off of the gold standard during Nixon and now we are in Iraq because of the Bushes ties to oil interests? Or are you just dissing the US Dollar? Plase elaborate. Dickey C, Neil P can bet 20 K a side, did u know that?

 

[Oceans11]

1970.
oil $2
gold $36

1974
oil $10
gold $100

1981
oil $32
gold $460

2002
oil $25
gold $300

Its just inflation.

If you correlate it against the Dow, the dollar probaly squares off against the commodities.

Edit:
Had to remove chart, looks like its a backdoor to a subscriber site or something.

Anyway, how many barrels of oil, or ounces of gold, does it take to buy the Dow now, compared to back then?

A lot more methinks.

[This message was edited by eek on June 06, 2004 at 06:43 AM.]

 

[Oceans11]

Using the eek commodities world benchmark.
(A standard bag of plain salted crisps by Golden Wonder and Tudor.)

price in 1970 2d

price in 2004 25p=5x12d = 60d

So inflation since 1970 is 3000%

Oil was $1.80 a barrel in 1970.
30 x $1.80 = $54

So oil has got cheaper, compared to salty crisps.

The Dow Jones averaged 700 in 1970.
30 x 700 = 21,000 today, thereby proving that by investing heavily in salted crisps you would be far better off financially than becoming involved in those fly by night pension and investment schemes.

Don't let them con you.

The future is crispy.

[This message was edited by eek on June 06, 2004 at 07:37 AM.]

 

[Phaedrus]

posted by cussin'it:
<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>
My question is the comparison seems suspect.
The utility of gold v. that of crude oil?

Please elaborate Phad?
<HR></BLOCKQUOTE>

As far as utilitarianism goes, oil is of course far more useful than gold (and one might argue that a dollar is more useful than either oil or gold.)

My point was that much of the fluctuation in the price of oil and gasoline lately, as I mentioned in the above-linked thread comparing oil in US$ vs. oil in EUR, is more directly related to the relative weakness of the dollar than anything else.

posted by Steve McGarrett:
<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>
Charles Givens has always said the an ounce of gold is comprable the price of a cheap suit throughout history. Are you saying that The relative price of oil has shot up when the U.S. came off of the gold standard during Nixon and now we are in Iraq because of the Bushes ties to oil interests? Or are you just dissing the US Dollar? Plase elaborate.
<HR></BLOCKQUOTE>

At the end of the day I guess that it can be said I am just dissing the dollar. In numerous threads (recently here) I have characterised the idea that we are in Iraq because of Bush or anyone else's love of oil as juvenile.

BTW, we didn't go off the gold standard in the 1970's; by the time Nixon made it official we had been off of anything remotely resembling a true gold standard for more than half a century. Weaning the world off of gold was a long-term process.

Fractional reserve banking, initiated in the US in 1913, enabled state spending and the expansion of credit to dramatically increase, but WWI put a severe damper on the abilities of government to wage war due to the costs involved (in fact, Britain went off of the gold standard during WWI for the express reason of being able to hyperinflate the pound in order to pay its war debts.)

After WWI, at the Conference of Genoa in 1920 the pound and the U.S. dollar were given the unprecedented ability to be counted as assets twice, once for the actual currency unit and once as a ledger entry -- thus automatically halving the gold standard as it was known prior to the orininal implementation of fractional reserve baking -- for all practical purposes the dollar went from being 100% backed to 80% backed under the Federal Reserve Act, then from 80% to 40% under the terms of the Conference of Genoa.

In 1933, President Roosevelt ended the ability for Americans to redeem their dollars for gold, and made it illegal for citizens to own gold in most of its forms (and seized rather a lot of it.) After that, it doesn't matter what other politicians like Nixon did, we were off of anything remotely resembling a gold standard. (President Ford repealed the XO that made it illegal for Americans to own gold in 1975 btw, which is why it is no big deal to own it now.)

All of this is of course utterly tangential to the original subject of the thread; just wanted to clarify that were were certainly not on a "gold standard" when Nixon declared himself a Keynesian and took the country off officially.


Phaedrus

 

[TheFunkMonkey]

More on Exec Order #6102:

Despite numerous claims by coin dealers and conservative patriots (sometimes the same people), it was never illegal for Americans to own gold. It is true that ownership of gold was closely defined. It is also true that zealous government agents took gold from people under the guise of law. However, for most people -- including coin dealers -- there was never any practical limit on the ownership of gold.

Presidential Executive Order 6102, April 5, 1933, made it illegal to "hoard" gold. The order exempted anyone whose "usual and customary" business required gold. (Dentists and jewelers come to mind. Electronic fabricators would come under this once electronics was invented.) Anyone could own up to $100 in gold coin. In 1933, $100 was two or three months wages for the average worker, about $6000 to $10,000 in today's money.

Numismatic Scrapbook magazine was founded three years after this executive order. In the pages of that publication, the London Spot Price for Gold was often published along with the London fix for Silver. Gold coins such as the U.S. $3, $10, and $20 were offered for sale by dealers to the public in display ads at prices within a few cents of the London fix.

On the other hand, numismatist Tom DeLorey recounts a story told to him by Abe Kosoff. "Abe Kosoff once told me how he had arranged, on behalf of a few wealthy clients, to have bags of U.S. $20s shipped to a European bank PRIOR to the Gold Surrender Act, in anticipation of it and in the expectation that the price of gold would be raised. It was. He was then visited by a U.S. Treasury agent AFTER the Gold Surrender Act who told him that they had been examining bank records to see who had been withdrawing gold coins in the six months prior to the Act, and that according to the records he had withdrawn x number of bags of $20s. He was given a fixed amount of time to return the coins to the Treasury, or face prosecution. He got them back and returned them."

In addition, another individual (Frederick Barber Campbell) lost a large holding of gold bullion stored in the Chase Manhattan Bank in 1933. It is true that in 1963, federal agents seized gold coins from the Witte Museum in San Antonio.

However, it is also true that the Thomas Elder catalog of April 14-15, 1933, carried a letter from William H. Woodin assuring collectors that they could own gold coins -- both rare examples and souvenirs. Furthermore, in 1954, the Federal Reserve Bank of Cleveland sent a letter to its members telling them not accept gold coins from depositors, but to direct people to take their gold coins to coin dealers.

Therefore, the bottom line is that like all bad laws, this executive order was unevenly enforced. However, in the main, gold was not prohibited to the average person. Yet, from the Great Depression right up to Y2K, dealers and collectors were able to profit from the general ignorance of the public. Smart numismatists bought gold objects for a pittance and sold "rare pre-1933 gold coins" at a healthy mark-up.

Even today, some numismatists remain mystified by the Executive Orders of 1933 that moved gold from local banks to the Federal Reserve. Collectors who know only second-hand tales easily make flawed statements about the ownership of gold -- or the ability or desire of the government to seize it.

The bottom line is that except for undifferentiable gold bars almost any numismatic item -- British Sovereign, U.S. $10 Eagle, Western Assay Bar, or California 50 Cent piece -- was always exempt from this law and common gold bars could be owned by any jeweler, dentist, or industrial fabricator.

 

[Phaedrus]

As I said FM, "In 1933, President Roosevelt ended the ability for Americans to redeem their dollars for gold, and made it illegal for citizens to own gold in most of its forms..."

It also, seperate from the ownership issue, signaled the end of redeemability of U.S. dollars for gold by American citizens, relegating that right to a privilege enjoyed by foreign exchange businesses only.

Like most of what FDR did, XO 6102it was a stupid and destructive thing to do. I'd be interested to know your source on the above btw, since it essentially characterises by implication anyone who questions or decries 6102 as either a nutjob or a crook.


Phaedrus

 

[Phaedrus]

Although I should add that I understand the motivation, since inducing fear of gold seizure has been used in the past by unscrupulous coin dealers to sell coins to non-collectors (such as is described here.)


Phaedrus

 

[TheFunkMonkey]

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Phaedrus:
As I said FM, _"In 1933, President Roosevelt ended the ability for Americans to redeem their dollars for gold, and made it illegal for citizens to own gold _in most of its forms_..."_

It also, seperate from the ownership issue, signaled the end of redeemability of U.S. dollars for gold by American citizens, relegating that right to a privilege enjoyed by foreign exchange businesses only.

Like most of what FDR did, XO 6102it was a stupid and destructive thing to do. I'd be interested to know your source on the above btw, since it essentially characterises by implication anyone who questions or decries 6102 as either a nutjob or a crook.


Phaedrus<HR></BLOCKQUOTE>

Actually, I think you stated it well. It was illegal for citizens to own gold in most of its forms.

Didn't post that info to show you up. I just thought it was good background info (I didn't even know about Exec Order #6102 until reading this thread). In fact, the 2nd and 3rd sentences of the 1st paragraph support your claim.

"It is true that ownership of gold was closely defined. It is also true that zealous government agents took gold from people under the guise of law."