“Three things cannot be long hidden:
the sun, the moon, and the truth.”
~ Buddha
Written by Bryan Lutz, Editor at Dollarcollapse.com:
Yesterday, a keen dollarcollapse.com subscriber made an important observation.
He sent in a question asking:
“We know each day the number of fiat US dollars it takes to buy an ounce of gold which has been increasing especially recently.
Here is my question.
If the dollar collapses and another money or currency replaces it, how in the world will anyone know how many units of that new money or currency it will take to buy an ounce of gold??”
Yes, exactly!
When a currency goes into hyperinflation it becomes harder to price almost everything, including gold, even in a reset.
Here’s an interesting chart…
Look at the price of gold during the weimar hyperinflation:
It is not exactly one gold ounce to paper mark. One “gold mark” was a paper currency backed by gold, which was later replaced by paper marks.
But you get the idea.
Purchasing anything was difficult…
Prices varied significantly on their way to the top.
As a result, gold became scarce.
That’s because gold has a unique quality currencies of the world cannot compete with.
It does what all forms of money do, expect better…
Whether paper currency, shells, or bolts of cloth, every form of money contains a certain amount of purchasing power.
And that means, you must have a certain amount of (whatever form of) money to buy your stuff.
Now let’s look at the dollar.
Since the USD broke away from it’s gold-backing in August of 1971, purchasing power has eroded.
Look at how much “money” it takes to buy oil in gold vs. US Dollars since the USD dollar went to fiat:
You can see how the purchasing power of gold has remained steady over the years, while the cost of buying the same amount of oil in USD has increased significantly.
More so, it has cost more in every fiat currency around the world to purchase oil with the same amount of gold.
So, instead of asking how anyone will know what the price of gold if there’s no USD, here’s a different question:
How do you know the price of gold in today’s differing fiat currencies?
Is the USD the right price?
Well, back in the day, before the Federal Reserve and central banking in the United States people would actually take their gold across the Atlantic on a boat and buy more stuff from France, or Spain, or Italy, and then come back to the US and sell that stuff.
Because a one ounce gold coin could buy A LOT more stuff.
In other words, its purchasing power was greater.
So you whatever you do, you want to protect your purchasing power.
Some people choose to buy gold as insurance against the erosion of their purchasing power.
And others choose to buy other currencies they believe will hold their purchasing power in the event of dollar devaluation.
So, in the future, if you were to buy Russian Rubles, it may cost less to purchase an ounce of gold.
Currencies are always relative to their purchasing power.
Most people “think” only within their currency.
But we are buying more than just things.
People see their money as something they exchange for things, rather than how much of those things they can buy.
The answer is:
How much an ounce of gold will cost depends on the currency you buy it in.
If the currency is stable, backed-by gold, in a productive economy, you may very well be able to purchase more gold, but if you are holding 100,000,000 German paper marks then it may cost you 100,000,000 German paper marks.
Whatever the next system of global trade is, it will contain currencies backed by gold.
More on how gold-backed currencies work in country-to-country trade.
Have a great day.
