From: eder@hsvaic.boeing.com (Dani Eder)
Newsgroups: alt.individualism
Subject: Re: Currency systems
Date: 2 Oct 92 15:48:58 GMT
Distribution: na
Organization: Boeing AI Center, Huntsville, AL

tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) writes:



>   Again, since the value of the more robust major currencies have shown
>   a stability of value superior to that of gold (which has devalued 50%
>   over the last 10 years) your "There are none" borders upon rant.

I suggest that the data disagrees with you.  In October of 1982 the
consumer price index (CPI-U) stood at 98.2.  Today it stands at
140.  Therefore the dollar has depreciated 30% over the past 10 years.
And the time period you are using starts from when gold was at an
all-time high price measured in dollars.

I suggest that stability of value is something that should be measured
over 50 year periods rather than 10 year periods.  This represents the
time over which retirement savings may need to be invested, and hence
is an interval people are interested in.  

The nearest CPI data I have to 1942 if for 1945.  It was then 16.2.
Gold was then still fixed at $35 per ounce.  If we inflate that price
by the ratio of CPI's, we find the equivalent price in today's dollar
is $302/oz, not that far from the current market price of $360 or 
so.  Note that 1945 was the end of WWII, which was an inflationary
period in itself, so the conversion from 1942 to 1992 would probably
be very close to today's market price.  

Now, this is a coincidence, that the inflation just happens to match
the rise in the price of gold.  Looking at the past 200 years, and
comparing commodity prices (i.e. a bushel of apples is pretty much
the same in 1792 as 1992), we find the value of gold has fluctuated
by plus or minus a factor of two from it's average value over these
two centuuries.  The peak deviations tend to occur at times of
economic stress, like the Civil War and during depressions.

The dollar, on the other hand has fallen by a factor of 8.6 since
1945.  In fact, it has fallen by a factor of 12 since 1929, the
earliest date I have information on.  This is an average decline
of 4% per year over the 63 year interval.  The 'half-life' of
the dollar, i.e. the time period over which it loses half it's
value has been as follows:

Interval	CPI start	CPI End		1/2 Life
1929-1950	11.7		24.6		19.6 years
1935-1955	9.8		26.8		13.8
1945-1965	16.2		31.5		20.8
1950-1970	24.6		38.8		30.4
1955-1975	26.8		53.8		19.9
1960-1980	29.6		82.4		13.5
1965-1985	31.5		107.6		11.3
1970-1990	38.8		130.0		11.5
1972-1992	41.8		139.6		11.5

So, when we look over 20-year intervals, the dollar has always
fallen significantly (since we got a central bank and got off
precious metals), with time constants to lose half it's value
under 30 years, and lately trending towards 10 years.

I suggest that gold has been shown to be more stable than the
dollar.

Dani Eder

-- 
Dani Eder/Boeing/Advanced Civil Space/(205)464-2697(w)/232-7467(h)/
Rt.1, Box 188-2, Athens AL 35611/Member: Space Studies Institute
Physical Location: 34deg 37' N 86deg 43' W +100m alt.
***THE ABOVE IS NOT THE OPINION OF THE BOEING COMPANY OR ITS MANAGEMENT.***
Newsgroups: alt.individualism