From George Reisman.
An interesting perspective about inflation.It really does, if you can pay for it in Gold dollars. Based on the present price of gold bullion, of approximately $2,000 per ounce, a twenty-dollar US gold coin, which contains not quite an ounce of gold, sells for just about $2,000. Put together 15 of these $20 gold coins and you have 300 gold dollars, which represents $30,000 paper dollars, which is the price of a new mid-range automobile.
Who says prices have gone up? The truth is that the price of our paper money has plunged. When we had a gold standard, the price of a paper dollar was a gold dollar. Today, the price of a paper dollar is just one gold cent. So it takes correspondingly more of this cheap money to buy anything.
Here’s how to stop this process. Just repeal whatever laws are in the way of merchants accepting gold and silver coins at their actual market bullion value, not their face value. Consider, for example, that the price of silver is now about $24 per ounce. An old pre-1964 dime contains .0715 ounces of silver, a quarter contains 2.5 times as much, and a half dollar contains 5 times as much. (A silver dollar contains more than 10 times as much.) The silver content of a dime, times its current price per ounce, gives it a market value on the order of $1.70, which means, for example, that a $10 meal in a fast-food restaurant costs less than 60 cents in silver coin.
If precious-metal coins could be used at their market value, Gresham’s so-called “Law” that “bad money drives out good money,” would be totally reversed. Good money, i.e., gold and silver, would drive out bad money, i.e., irredeemable paper money. People would see every day, when they went shopping, that prices were rising only in paper money, not in the precious-metal money (or paper money redeemable on demand in precious metal). They would turn against the paper, unless and until they could have confidence that it could easily be redeemed for precious metal.
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