Still think the ever-higher prices at the gas pump are a result of greedy OPEC maneuvers? Think again. This chart shows the price of oil in dollars (blue) and versus the price of gold (red) over the last half century (click to enlarge).
THIS is why “crazy people” like Ron Paul and those of us who agree with his economics keep harping about the “gold standard.” Unless a currency is legally linked to some commodity, the central bankers can print as much of it as they want. What they CAN’T do is eliminate the inevitable effect of oversupply: diminishing value. It’s no coincidence oil prices are spiking while the Fed and its foreign counterparts are throwing billions of new dollars at the financial sector’s debt implosion.
Here’s another way to look at how commodities are more stable than simple paper currency:
In 1964, gas was around $.25/gal. Quarters were made of silver back then. Of course, quarters aren’t made out of silver anymore… it became too expensive as the currency inflated! Now go to http://www.coinflation.com and look at the current silver value in a 1964 quarter. As of today it’s $3.30, pretty close to the avg. price of gas according to http://www.fuelgaugereport.com/. So that old quarter will still buy you a gallon of gas… but its younger siblings can’t because the currency has been debased.
A dollar is not a dollar is not a dollar — unless its value is fixed to some standard that prevents printing it ex nihilo. Otherwise, the entire currency rests on a foundation of air. Maybe that’s why our economy looks like Wile E. Coyote… right after he runs off the edge of the cliff and realizes he’s about to have a long fall.
(HT: Nate @ BloggerBlaster, and his readers)