Real-life Examples of Gold Holding Your Purchasing Power

Purchasing power refers to the amount of goods and services that can be bought with a unit of currency, such as the US dollar. It represents the value of money in terms of what it can buy, rather than its nominal value. When the purchasing power of the US dollar changes, it means that the quantity of goods and services that can be bought with one dollar has changed. Changes in the purchasing power of the US dollar have significant implications for consumers, businesses, and the overall economy.

The purchasing power of the US dollar has fallen significantly since the 1970s

If the general price level of goods and services increases, the purchasing power of the dollar decreases, as each dollar can buy fewer goods and services. This is the true definition of inflation. Inflation is the devaluation of our US dollar mainly by deficit spending and fiat money creation. Inflation today is not because corporations and companies are raising prices because they want to. The prices of everything are rising because of the government deficit spending that is occurring and the Federal Reserve Bank providing the money creation mechanism to fund this deficit spending but creating currency out of thin air. Corporations ultimately have to pass down these increased costs to consumers.

Fiat currency systems always produce inflation and lost purchasing power

Shockingly, many people do not realize that their purchasing power has fallen at a much greater rate than their wages have raised over the past few decades. Fiat currency systems always produce inflation, lost purchasing power, currency devaluation, or possibly even government default. This time is no different today here in the United States compared to what has happened to other fiat-funded debt systems that have occurred throughout history. Our currency changed a great deal in 1971 when Richard Nixon took us off of the gold standard. Our currency called the Federal Reserve Note is now losing purchasing power at an alarming rate. The plan of our trusted politicians to combat this is to spend more money that we don’t have, fund it with more debt, and have the Federal Reserve Bank mouse-click more fake currency out of thin air to support government debt.

Gold has a long track record of holding your buying power while fiat money does not

When it is said that gold has held purchasing power over time, it means that the amount of goods and services that can be bought with a given amount of gold has remained relatively stable over long periods, despite changes in the nominal prices of those goods and services. In other words, an ounce of gold today would allow you to purchase a similar amount of goods and services as it would have in the past, even though the nominal prices of those items may have changed significantly due to inflation or other factors. Fiat currencies, like the US dollar, are not backed by a physical commodity and can be subject to devaluation through inflation or other means. In contrast, gold’s inherent scarcity and durability contribute to its ability to maintain purchasing power.

An ounce of gold in 1930 bought a man a power suit

In 1930 an ounce of gold averaged about $20. An ounce of gold and the $20 bill were both able to purchase a businessman a nice suite. Gold here in 2024 is now over $2,100 per ounce and that ounce of gold can still can buy a man a nice suite. On the other hand the $20 paper bill would buy a pair of socks possibly at Brooks Brothers. Gold has held its purchasing power in this example since the 1930s and dollars did not.

Gold has held buying power when it comes to groceries since 1990

There was an interview done in December of 2023 with Tucker Carlson and Stephanie Pomboy. The introduction to the interview showed an interesting statistic of what a grocery list in 1990 costs today in 2024. The grocery list in 1990 cost $19.62. That same grocery lost today in 2024 now costs $72 compared to 1990 in dollars. The price of gold in 1990 averaged $383 per ounce. So in 1990 those groceries cost .051oz of gold, and today those same groceries cost .03oz of gold. Gold has held its purchasing power versus everyday groceries since 1990 and dollars have not.

Gold has outperformed the Dow Jones Industrial Average since 2000

The Dow Jones Industrial Average (DJIA), often referred to as the Dow, is a stock market index that tracks the performance of 30 large, publicly-owned companies listed on the New York Stock Exchange (NYSE) and the NASDAQ. The DJIA is one of the oldest and most widely followed stock market indices in the world, and it is considered a key indicator of the overall health of the US stock market and economy. The Dow averaged 10,786 in 2000 and an ounce of gold in 2000 averaged $280. So it took 38.5oz of gold to buy the Dow. Today the Dow is trading at 38,722 and gold is trading at roughly $2,100. It takes 18oz of gold to buy the Dow today. Gold has outperformed the Dow since 2000 by approximately twice.

The US dollar has lost 25% of its purchasing power since 2019

According to average inflation figures, the US dollar has lost 25% of its purchasing power over the last four years. I would contend that it is even more than that. The average price of gold in 2019 was $1,393 and today gold is roughly $2,100 per ounce. Gold has risen approximately 50% since 2019 and has outperformed the purchasing power of the US dollar by more than twice. Gold versus the US dollar since 2019 is just another example of gold holding your buying power and your US dollar currency does not. The comparison back to 1971 of the dollar to gold is even worse. $1 is now worth $.15, while $1 of gold is worth over $50 compared to averages in 1971.

Gold has even kept up with real estate since 1999 here in Ventura County, CA

California real estate has created multimillionaires over time and has been a great investment for most up to now. The average home price in Ventura County, CA in 1999 was roughly $250,000. Those houses today are worth roughly $1.8 million. This would be very similar to the real estate market in the Scottsdale, AZ area. So, it takes roughly 7× the amount of dollars to buy that same house today versus 1999 on average. The price of gold in 1999 averaged $279 per ounce. The price of gold today is roughly $2,100 which is approximately 7× the price it was in 1999. It takes roughly the same amount of gold in Ventura County, CA to buy that house that now costs 7× more dollars. Gold has held your purchasing power when we compare average real estate home prices from 1999.

Devalued dollars inflate prices. Government deficit spending and money creation to support that debt fuels inflation. It is not the other way around as our wonderful central bankers and politicians would lead us to believe. They are liars and our currency with its dwindling purchasing power is a lie. Some stocks and recently some cryptocurrencies have kept up with inflation for sure over time. One of the main differences between those assets and physical gold is that you can hold gold as a private tangible asset. You cannot hold assets privately that are connected to paper markets or digital markets. Those assets are not totally in your control.

If we consider purchasing power, currency devaluation, debt, control, and privacy in today’s market environment, the case to own gold in physical form is more important than ever. Paper gold, digital gold, or mining shares are not the same as owning the actual asset in your possession. It is imperative to hold significant purchasing power outside of a rigged system supported by fake money that is seeing its purchasing power continue to dwindle. This is also where physical gold comes into play.

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