new_trader
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Priced in Gold:
Food
The UN Food and Agriculture Office tracks prices of food around the world, converts local prices to US Dollars, and calculates an index with 100 being the average for 2002-2004. Prices for meats, cereals, oils/fats, dairy and sugar make up the components of the index, which is updated monthly.
Of course all the currencies used to quote these prices are being depreciated by their governments, just as the US dollar is. And as this depreciation accelerates, so do the apparent "rises" in the cost of food. But is food really getting more expensive? Of course not!
Technology and capital are being applied to reduce the cost of growing and shipping food everywhere in the world, every day. As pests are controlled, machinery makes agriculture more efficient, and world markets make more bounty available to everyone, prices fall naturally. Of course bad weather, bad government policy and other problems can create short term shortages, but over all, prices have been falling for a long time, and show no signs of reversing. As you can see on the chart below, they have just bounced off their record lows!
What is happening though, is that governments are destroying the purchasing power of money, making prices appear to rise, and making it hard for families to gather enough of the rapidly depreciating stuff to buy the food they need. Expect this trend to continue for years to come.
Crude Oil
Oil is a volatile commodity, with it's price swinging wildly in a range from less than 1 gram per barrel to almost 5 grams per barrel. But this chart also shows that these oscillations are part of a sideways price movement centered around 2.5 grams per barrel. Crude's current price around 2 grams is a bit below it's long term average.
Of course, the fluctuating value of the dollar makes it very hard to gauge whether oil prices themselves are rising or falling… Oil today at 2 grams, is about the same as it was in the early 1950s; but if you measure the price in US dollars, you would get the impression that it is about 30 times more expensive today!
Natural Gas
From 1998 through 2008, natural gas prices were very volatile, but they rarely dipped below 200 mg per million BTU. In mid-January 2009, however, support at 200 was broken, and no rally since has managed to get above the 170 mg level. A record low of 77.2 mg was set on October 25, 2010. At the end of May, the price was about 95 mg, 22% above the all time low.
US Home Prices
The Case Shiller home price index in US Dollars and in grams of gold. Both indices use the price of a home in January, 2000 as 100. Prices in gold and dollars tracked pretty well until 2001, when the dollar began to collapse, taking the true value of homes down with it.
At first, the drop in the dollar simply offset the apparent rise in home prices, and prices in gold worked sideways until 2006. But when home prices began to fall in dollar terms, and dollars were themselves falling in value, the double-whammy pushed true home prices down to levels not seen since the late 1980s. In fact, they set a new record, the lowest level since the index was first published. This means that most homes purchased in the last 20 years are now worth less than the original purchase price, even if they show gains of 100%, 200%, or more, in dollar terms.
You should also notice that the most recent uptick in dollar prices is more than offset by the decline in the value of the dollar, the unavoidable side-effect of government bailouts and interest rate price fixing by the Fed.
The last chart shows a synthetic index built from several different sets of home price data complied by Shiller for his book Irrational Exuberance. Looking back to 1890, we can see that home prices today are lower than they were during the Great Depression, and are approachng their all-time lows.
US Wages
Although production worker's wages are at the highest levels ever, as quoted in US Dollars, they have fallen in gold terms to the levels of the early 1980s. The same is true for Federal Minimum Wages. It's no wonder that households need multiple earners, and are still struggling to make their mortgage payments and keep food on the table!
But of course Atilla, as usual, you will try to explain it away with some other esoteric phenomena, understood only by you.
