jschwefel
Tesla fan/TSLA, Model Y and Cybertruck owner.
Clearly macroeconomic inflation is much more complicated than looking at the price of gold in dollars. That was not my intent. However, gold is important because it was used to peg the dollar (i.e. the Gold Standard) up until the 1970s, and the numbers are what they are.The consumer price index, flawed though it is, has increased by 6.34x since 1974, whereas 2400/35 = 69. Using the price of gold as a proxy for overall inflation is ludicrous. Off by an order of magnitude. Prices in general are obviously nowhere close to 69x higher than the were 50 years ago. If that were the case, gas would be $36/gallon, the median US household income would be $780k, and the median US home price $2.7M.
An ounce of gold is still an ounce of gold, but the demand for ounces of gold has changed drastically in the last 50 years, while supply from mines is only about double what it was in 1974. The majority of gold is used for jewelry and electronics. It looks pretty, doesn't oxidize, and has excellent thermal and electrical conductivity. As the population of Earth has grown and technology has advanced, demand for jewelry and electronics has grown. Even more of the demand growth came from central banks and investors buying much more gold than they used to.
And why is gold special? You could arbitrarily select any other commodity that still has the same physical properties as 50 years ago and get very different results. Even for other precious metals. Since 1974, silver is up 5x, platinum is up 6x, palladium up 20x.
Macroeconomic inflation in the result of a variety of factors, only some of which are within the control or influence of governments. Aggregate demand, aggregate supply, money supply, velocity of money, net investment, etc. THEY would love to have precise control over inflation, but THEY don't possess that power.
It’s probably more accurate to say the change in the price of gold ($35 to $2400) is “dollar devaluation”, not inflation. Even that is not exact because of supply, demand, mining efficiencies, etc., but it is more accurate than simply calling it “inflation”.
And the USG largely controls the value of the dollar by how much it pumps into the economy. I say largely” because again there are many more factors at play when it comes to pricing goods and services.
Suffice it to say today’s monetary policies are complicated. To be clear, I’m super happy we moved away from the Gold Standard, but in a world of fiat currencies it’s important to recognize the goal posts for currency valuations move.