Finding The Real Price Of Money

The four major monetary zones have collectively printed over $40 trillion currency units (call them dollars if you want) over the last 6-7 years.  Most agree that about 180,000 tons of gold exist above ground.

At today’s price of around $1250 per ounce that would be about $7,200,000,000,000.

The gold price would need to rise at least five and half times to back all of the $40 trillion in world fiat, or at least $7000 per ounce of gold. At a 10:1 ratio, that would put silver at $700 per ounce.

The only way to pull this monetary fiasco together, without defaulting the entire edifice, is to revalue the metals up to that level. Would they do it? No way. Will it happen naturally? Perhaps, though not without disorder and confusion.

And if there were any economists left out there with a tiny semblance of formal training about the role of gold and silver in economies for thousands of years — there’s a motivation to keep it under ‘control’.

Everything is suppressed, only silver more so.

When we attempt to get some idea of where we ought to be, we can use inflation adjusted highs for comparison. Conservatively speaking, if we used regular CPI we’d be at around $100 or more. If we went one step further and used the old way of calculating CPI – without all of the hedonic substitutions – we’d be up over $350 per ounce.

Re-monetizing the metals would be the ultimate step.  That’s not a prediction for $7,000 gold or $700 silver.

I don’t think we will make it that far over $100 per ounce without some sort of monetary reset.

But it sure is one hell of an inflation-adjusted high.

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