Buying Cars with Gold
In August 1971, President Richard Millhouse Nixon repudiated the obligations of the United States of America to redeem the United States dollar for gold. Prior to this act of perfidy, the dollar was redeemable by foreigners for gold at the rate of $35 per ounce troy of gold.
Nixon's act of perfidy was almost four decades after Franklin Delano Roosevelt's acts of perfidy in banning private ownership of gold for Americans, stealing gold from defenseless women and children, and deliberately plunging the USA into the Second World War by manipulating the Empire of Japan into attacking while deliberately leaving the forces at Pearl Harbor unready for the attack he knew was coming. Prior to 9 March 1933, gold traded at about $20 per ounce.
But, you say, what difference does it make, really? What are the practical implications of these choices? Why should you care?
Well, let's look at something very practical you may have done with your dollars in 1971. You might have bought a new car. Let's say you were doing pretty well, and you wanted a brand new luxury car. You looked around and set your eyes on a brand new, 1972 model, Cadillac Eldorado convertible. The price? $7,546. Here's a picture of one in gold paint.
These cars went on sale in September 1971, not long after Nixon "closed the gold window" and committed economic treachery most foul. In that month, the price of gold averaged $42.02 per ounce. To buy that brand new 1972 Cadillac Eldorado would have cost you 179.58 ounces of gold.
So, how much car could you buy in September 2005 with 179.58 ounces of gold? Quite a bit more, actually.
A 2006 model year Cadillac XLR became available in September 2005 with a manufacturer's suggested retail price of $77,295. On the 2nd of September 2005, an ounce of gold sold for $443.60. With 179.58 ounces of gold, you could buy that XLR and still have $2,367 left over - enough to buy 739 gallons of gasoline at $3.20/gallon.
On the other hand, what kind of new car can you get for $7,546? Not much.
The 2006 Chevrolet Aveo retails for $9,455. The 2006 Hyundai Accent GLS 3-door retails for $9,999. Perhaps you'd feel more comfortable buying a used car for that price?
Here's the practical consideration. If you had $7,546 in 1971, you could buy a brand new top of the line Cadillac convertible. If you had saved that money from 1971 to 2005, you could not buy any brand new car today.
If you had bought gold in 1971 with $7,546 and saved your money in the form of gold, the 179.58 ounces of gold you bought then would be worth over $79,662 in early September 2005. You'd have enough money to buy a brand new top of the line Cadillac convertible, and have cash left over for gasoline. If you'd saved your gold until 15 October 2005, you could buy the new Cadillac XLR, a thousand gallons of gasoline, and a new Rolex Oyster Perpetual watch.
That's what the government of the USA has done to the USA dollar. They've made savers into paupers. They've made savings accounts into dust bins. The government's fiscal, monetary, and trade policies have made the USA dollar worth less than a tenth what it could buy in 1971. People on fixed incomes are particularly hard hit by this pernicious inflationary policy.
So, the practical choice for storing value over a period of decades is gold. If you held gold from 1971 to 2005, you would now have wealth. If you held dollars from 1971 to 2005, you would now have enough to buy a good used car, or a mediocre used car and some gasoline.
Is there any reason to expect anything different in the next thirty-four years? No.
Doug Casey was recently interviewed on this idea. He said, "Well, when you keep your assets in US dollars, you are keeping your assets in an entity that fluctuates in value based upon the whims and indeed the psychoses of the politicians that control its value."
Are psychotic politicians the way to bet? Or gold? The choice is clear. Choose gold.
Copyright © 2005 Free West Trust