February Article

 

February Article

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( This was published ten months ago in my magazine- subscription info follows the article )

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HISTORICAL PRICING WITH GOLD

I had a minion send me a couple of Xerox copies of old timey book chapters. Essentially, hundred year old techniques for woodsmen. Think “Backwoodsman Magazine”, but in book form and written way back in the day. I have only marginal interest in that, but only because I chose the life of an academic over that outdoors. I practically lived outdoors as a kid, as we always lived near small town in the wilderness California. Almost always, you walked out the back door into the woods. It was a great childhood.

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Then I went “camping” in the military, but in more extreme climes, and my interest in being outdoors evaporated almost entirely. Then, later, living in an RV off grid, that was the most I ever wanted to rough it. Not to say I don't miss the outdoors. I do. I just chose another path. So what got my nipples hardening and sphincter clenching was mention of the prices of the authors outdoor gear. Seventy cents axes and $8 rifles. But then a thought hit me. Was this REALLY a good deal? If you priced in inflation, was this the great price you believe?

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I don't know WHY my thoughts were directed hence. This is just how my brain works. Some authors can envision a fantasy world, I pick out Apocalypse Pertinence everywhere. So, to begin, we take the Internet Inflation Calculator and we wipe our ass with it. Those use the OFFICIAL inflation rate. That is like asking the NOL what her boob size is after losing weight. Officially, it is still a D, although not a Double D. I have my doubts. I TOLD her I didn't want her to lose any of her Pleasant Plumpness, but she just HAD to get sick! The official size doesn't match my perceptions.

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Inflation figures have been gayed up almost from the beginning ( do you figure in the 40% inflation as gold was made illegal to hold, then the adjustment in the official gold price, mere months after FDR took power? Savior of the poor, my dimpled ass ). If you care, go visit that grandpa site that purports to give better figures with M3 money creation, without adjustments. I have my doubts even that is all that correct. I prefer the gold prices of the time and how much you can buy with those. You have to be careful, as it isn't a 1=1. Different eras had different gold values.

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You can't just say, a mans suit two hundred years ago and now are both an ounce of gold. Because few of us wear suits, DUH. I like the gold earned per month and matched to prices, myself. And I discount the era of Spanish colonies and gold. That was inflationary, a One Off Event. So was the gold rush of California, Canada, Oz and South Africa, BUT! Coal and oil production allowed industrial growth which was financed by the extra gold, so the price effects was far more stable. Then you had the end of gold currency, after WWI. Culminating in the US in the early Thirties outlawing citizens ownership.

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Then we didn't have much change in a stable dollar price system until the 1960's, leading to turmoil the next few decades but still, basically, a good indicator of prices. Until 1990, with the initial surge of ALL resources from the US winning the Cold War and colonizing most of the planet through globalization. Gold took a two decade break from being as scarce or expensive to mine, until a smidge after Global Peak Oil, and now we are back on track. And frighteningly, it shows we are WAY down in wages. Which isn't even as scary as it could be, since gold prices have been manipulated at least 150 years to more reflect banker control than purchasing power.

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But let's return to 1920, the era of the book chapters I read, and the prices presented. Seventy cents for an axe was when gold was about $20 an ounce. It was also, roughly, when you earned a dime an hour, or an ounce of silver a day, which was around one ounce of gold a month ( when the gold/silver peg was 1 to 20 ). That means, compared to today's average wage of a bit under an ounce of gold a month, your 1920 axe cost $54. Well, crap! That doesn't exactly seem like all that great of a bargain now, does it?

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And that $8 rifle ( not even a fancy top of the line rifle ) in today's gold price? $720. I bought middlin quality combat carbines for half that price, prior to the Corona Mass Firearm Panic ( well, if we avoid Political Correctness, we can call it the Great White Flight To The Gun Stores To Protect Themselves Against Looting And Rampaging Blacks Panic ). Now, I KNOW I'm not comparing Oranges To Oranges. Today we can only buy Apples. A century ago you were buying Swiss level quality from American manufacturers- Oranges. Today, only lower quality goods from anywhere, so Apples. A rifle then would hold up better than one now ( or, at least until the more corrosive ammo shortened its well crafted life ).

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If we adjusted over to like comparisons, I think prices would have been roughly equal. They appear to be half price but figure you'll need to buy two for the same use. And as for axes, even if you can buy a $15 one now, you'd probably need to buy nearly four to equal the old one, factoring in Chinese junk. So prices ARE the same. But we did embrace the 70's factory exit and the 90's Chinese Factories, for a very good reason. We couldn't afford to pay even more. Make all the noise you want about quality costs, the average-AVERAGE-worker is not paid enough to buy those.

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Why did we have better quality goods then, or in other words, workers were given more for their efforts? They had gotten LESS, fifty years prior. You cannot point to the Irish Influx, because the latter immigration wave was far larger ( the Jews, Italians, Eastern Europeans ). I contend that you merely look at the source of energy our economy used. Coal was a good enough substitute for wood ( although not great-hard woods and water power weren't too far behind. Coal was more a need as wood supplies were denuded ), and it did improve the velocity of the Industrial Era, but the energy delivered was dwarfed by oil.

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I know you all get tired of me yammering on about oil, but we are living in the Oil Age. If you lived in the Agricultural Age, you would always be talking about the weather and commodity prices and soil fertility. Oil Supply is EVERYTHING, not just “A” thing. Oil is how you eat and how you protect yourself, how you mate and how your kids are provided for. Excuse the holy living crap out of me for focusing on oil. If everyone contacts me and tells me they hate their children, I'll stop fretting about oil.

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The transition to oil from coal enriched everyone, even accounting for the massive waves of OtherColor immigrants of a century ago. The tide DID lift all boats ( especially compared to the previous decades where the Robber Barons did not share very well. If you accept my premise that coal didn't have enough energy, but oil did, that could actually explain the wealth inequality better than “greed” alone would. Although, I'll take “Yankee Vermin Scum War Spoils” as a close second ). It might not have lifted our boats as well, but it was still an improvement ( compare to now where immigration hurts far more ).

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( Germany and Japan were only partially oil powered, and far more from coal [ whereas Italy had neither and barely counted in the great scheme of things precisely for that reason ], but they didn't have a central bank or a Rich Humper class and had a far more national orientated leadership, even if it did enrich itself to some degree. This is why I believe National Socialism was far superior to Capitalism in the era we cover. Communism proved that you need an adequate social structure to accompany your resources, or you waste them all. Italy proved a great social organization only helped so much. The US did NOT prove the superiority of capitalism. It only proved capitalism was better than communism in delivering extra benefits from resources so than the rich could thrive along with society )

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( You'all need to stop with the political focus and the naive belief that leadership can trump resources. Resources ALWAYS get a say. And as our good buddy Tainter said [ and what made his book worth reading, this one major component of collapse ] great leadership cannot reverse the collapse, nor can poor leadership ruin a period of enrichment. We have been dwelt our hand in this poker game, and it doesn't look like we get to beat the house this time. What part of “baked into the cake” is presenting difficulty? The collapse trumps Trump. Sorry, Not Sorry )

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( Do I gain an indecent amount of pleasure from these events? Of course I do. I would be lying to say I'm all sad and stressed. Yes, of course the collapse is going to suck giant hairy monkey balls. Soonest Started, Soonest Done. If any society in the history of the world needed a Darwin cleansing and a kick in the ass, this wretched foul hunk of dung does )

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For a hundred years, oil obviously helped in extracting gold. The more man powered ore had been extracted during the Coal Age, so if we hadn't had oil we would have gotten a lot less gold out of the ground ( the century of oil powered gold extraction exceeded all of previous mining combined prior to that date ). But there was also a reason gold didn't matter as much this last century. The reason wasn't that England had to decouple from the gold backing because she needed more money to finance the Great War. Yes, she would have done so for that reason, but then the US did NOT assume the global financial currency with all of Europe's gold. Why?

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The US got into WWI not because of democracy. We got into the war because we now had a central bank, and the bank immediately upon creation ( almost as if, oh, I don't know, they had already been working behind the scenes prior to official founding ) started loaning oodles and gobs of money to England and France. Who then proceeded to fight the war as if they were all going to win the war. What was the war about? Colonial control and wealth ( England started the war to defend her shrinking economy against upstart Germany. You mine coal for a few centuries, yeah, then your economy based on coal gets into trouble ).

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If they won against Germany, they controlled the globes colonies ( don't forget, China was on the table along with Africa ). If Germany won, she could continue her economic expansion with newfound colonial resources. Don't forget the Baghdad To Berlin Railroad ). So everyone bet everything on victory. The only winner was America. She ended up as the premier economy and held most of the gold paid as part of the war loans. But this didn't produce inflation, did it?

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Because gold had already been eclipsed by oil. We got most of Europe's gold, and instead of inflation we got deflation. Recall the lack of inflation from the Coal Age's gold rushes. The Industrial Age's infrastructure build up was financed by all that new gold ( the proxy for coal ), so there was no currency inflation. Just as today, the Federal Reserve shoved tens of Trillions ( T, trillions. Not B, billions ) into the US stock market without inflation ( this is far less effective now of course ). The problem with the Oil Age was that there was so much oil that was invested into its own infrastructure, there was no inflation.

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That was the Great Depression. Yes, the central bank created that event to take over control of the country even more, to cement that. But they were working in a deflationary environment from severe overcapacity. Just as China gave us twenty years of deflation ( as seen by money creation NOT being inflationary ) by industrializing. There was so much plant to turn so much material into goods, the prices went into the toilet from competition ( another strike against capitalism, in the era of the left side of the oil bell curve ). You'll of course note that Corona was about killing capacity.

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Would you care to guess why inflation is making a nice comeback? It isn't because of credit or currency creation from the Fed. Yes, we are exponentially creating more, but we did the exact same thing in 2008, with ten percent yearly inflation. We didn't see inflation because fracking oil resumed energy creation. If you print extra money, but that was offset by extra oil, there is no inflation. Oil had become money, long ago. Gold didn't matter, because oil was the new money. That is how the Fed got away with inflating the gold price 40% in 1933. Oil production countered that.

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Let's review that. If you pump a barrel of oil, you've created that much extra energy. It would be like a farm doubling food one year. The price goes down on that food, so the whole yield can be sold. It is just supply and demand. Oil is ALL created goods. Double the goods, halve the price. Oil production is wealth, not gold. That is why gold was a mere commodity for a hundred years. When the world saw Peak Global Oil in 2005, gold started going back up. When the US had its oil supply shocks in the 70's, gold went back up. When a supply of oil was found, the 80's Alaska oil or the Fracking Oil in about 2009, gold dropped back to commodity pricing ( JUST the cost of extraction ). In other words, enough oil supplants gold as a money unit, not enough oil and gold returns to the currency.

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Gold would be a heck of a lot more expensive right now if we hadn't had the Fracking Oil Decade, but you can be sure gold is going to go back up and relatively quickly. The oil supply is contracting quickly. Allow me to crap in your Cheerios. The US domestic oil production fell SEVENTY-FIVE percent during CY1. In case that math is difficult, we went from 12 million barrels a day to 3. THREE! It is back up now to 6, which probably explains the easing of restrictions on Corona, the increased economic activity. But I don't think production will go up any further. Six million a day is conventional oil. I think almost all the fracking is shut down. If we could have recovered to 12, I think we would have.

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In case your head is up your ass, this means that we have recovered from near zero economy to fifty percent, so any recovery is to HALF of where we were in 2019. I don't think we are close to seeing anything approaching a serious contraction yet. Please recall that the 1970'2 first oil contraction was a mere 5% of our oil from foreigners withheld. We just lost 50%, NOT five. Do you recall the 70's a GOOD time? Not to say it will be a repeat. We could handle a repeat, as that has been the New Normal for decades. Ghetto crime has been normalized. Mass unemployment was normalized. No, we are in for much, much worse.

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That is why I'm not worried about being wrong about the Corona ending. If it ends ( and it almost looks like it is, de facto ), the economy implodes faster, as increased demand for energy cannot be met. Just look at gas prices since we started driving about. That is a tiny taste. I can confidently project $4 gas easy ( most places except California. They are about a buck more than everywhere else ). If Corona lockdowns are lifted, $5 gas. This year. And I could be wildly optimistic. Remember, IF the lockdowns are lifted.

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Energy availabilty is NOT just gasoline prices. It is your jobs, your pensions, your food. I'll remind you again. 2019 saw the failure of the banks and the medical industry. Medical alone was 20% of the economy. 2019 was Peak Fracking Oil, and fracking oil and natural gas has a PROVEN track record of near vertical drop on the right side of bell curve production. We are almost at 24 months since Peak Fracking. Which means there is no return and our oil supply took a huge crap. Meaning, YOUR economy.

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Inflation JUST from oil production crash is going up, big time. That is before bail out debt creation, PetroDollar collapse or anything else is factored in. Gold is going up hugely, going from a commodity back to a precious metal. As will silver, the supply almost non-existent. Of course, if you have gold, don't hurt yourself patting yourself on the back. It doesn't matter how high the price goes. We are already in the beginning phase of the collapse and precious metals is ONLY good for wealth preservation at that point. It is a parked store of wealth that must be held through the Dark Ages until trade resumes. But, Jim! You studmuffin that all women moisten their loins over, and with better hair than most of all humanity even with a touch of receding hairline, won't we see trade as Russia and China lead the old world in a new bipolar political divide?

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Well, yes and no. China and Russia will lead the non western world, more than likely. But remember what 2030 is. The return of global oil production to 1930 levels. Which means population declines. Russia already shed its excess population when its empire imploded. China has seen a drop in population trendlines from its One Child Policy. They are working the correct trend towards 1930 population. The US and its colonies have NOT. We are working AGAINST the trend. We are screwing ourselves, adding population in a food declining world.

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A bi-polar world isn't an EQUAL world. It can be as easy as a return to two superpowers controlling the rest of the Turd World countries. And guess what? America is already a Turd World. I do NOT engage in hyperbole to sell my pet collapse theory. America will, prior to Balkanization, perhaps still hold sway over western Europe and Latin America ( although probably not much south of the northern Atlantic ). But she is an empire in obvious decline, fighting the trend line in resources. Asia will do much better, and probably bring Africa along for the ride ( I'm not studied enough on Latin America, but surmise less support )

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This is not to say we will see a Chinese Century. Oil Decline will be the tide lowering all boats. Just some faster than others. And China still has a lot of population to shed. While Russia must eventually protect herself from China. So while the US is in for major collapse, Asia suffers less but is only where we were thirty years ago. Kicking the can down the road. Of course, economically Asia has the gold, doesn't she? They weren't stockpiling because they plan on being the new global dollar. I think they see a more old hemisphere hunkering down. Gold will return to historical value, pre-1492 value. And America has one precious metal left, and it ain't gold.

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Lead. We have a good supply of the worlds lead. The unfortunate thing is that you cannot stockpile lead once you need it. You use it or lose it. And then our lead goes from some household centralized holdings to one 55 grain portion per scattered corpse. Still worth salvaging, but no where near as valuable without primers or powder. But that is what a century of oil consumption has left us, as far as wealth. No oil, no gold, but lead.

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As far as our wages, look at where most of us are at. Do most of us earn $1800 a month? Is your household earning $42k a year? Not as close as many as used to. With two workers per household, the historic one ounce of gold a month per worker would dictate that is the average workers wage. And we could get crazy with comparisons and start converting land and food prices, construction materials, transportation and the like into gold. And most likely, what would have been comparable ten years ago is no longer close to that. And I am JUST talking about during the Oil Age.

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I'm not comparing gold earnings to prices from the 1880's. I'm talking about just a hundred years ago. Back when everyday life was about the same. Mass media, mass internal combustion engine, the machine age. 2020 might have been a magical unicorn glitter time of Universal Basic Income ( disguised in other forms such as rent moratoriums, unemployment insurance and Orange Man checks ), but even before that our wages were dropping in real terms of gold pricing and earnings. I don't think 2021 will be as kind.

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Not because “you cannot print the economy indefinitely”, but because our oil supply contracted so much. Everything we are doing now is using embedded energy. That by definition cannot last indefinitely. You have your collapse timeline. It already started the year before last when the fracking oil stopped flowing. And this time, compared to 2008, the can did NOT get kicked down the road. This time, we didn't get any extra time to prepare. Well, you did, a little. I told you in November 2019 the end was nigh, as the banker liquidity crisis became obvious to the most obtuse. You had a quarter of a year you could have gone all in on preps. The last twelve months, no, no more preps are for sale.

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Still want to hold off on food and ammo purchases, regardless of price? I cannot guarantee anything, but I simply do NOT see ammo returning to normal. And food? The situation will get MUCH worse for food. You can go a few weeks without using ammo, not so much with food. I know you Backwoods Home freaks are patting yourself on the back right about now. And you should. But most of them don't see a future outside Great Depression Two. They don't see Rwanda Plus Bosnia. They think fences and dogs with an AR Owner backstop trumping fires.

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Let's review CY1. Billions of dollars in loses, the Mostly Peaceful Protesters killing what retail Corona didn't, and you are safe in the suburbs? The difference between you and I isn't that I'm out of harms way. It is that I KNOW I'm humped. Do you? I at least have an additional 1% chance I'll get my head out of my ass and flee to safety. You are bugging in to disaster. Or, if you know and are at peace, then it is all good. Enjoy what is left, and thank you for increasing the survivors odds by being a lead trap after you stop a fair number of OpFor's. Bless your heart!

( .Y. )

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Malthus' Nightscape Is Nigh

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James M Dakin

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