A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

[Rajiv]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

I had posted something along these lines earlier -- using graduate teaching/research assistant salaries -- it may be useful to revisit here

And the entire thread below that

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

JT,

Sure, strictly speaking the SGS delta vs. CPI in the last 28 years should multiply straight through since cost up to 1980 is then increased by CPI or SGS numbers each year thereafter.

However, if SGS is truly correct, then you wind up with some truly eye popping numbers for various staples:

http://historicaltextarchive.com/sec...icle&artid=418

Using 1913 - 2008 via CPI = 822% increase, and comparing with SGS 3x and SGS 4x vs. CPI:

Article	1913	CPI 2008 price	SGS 3x CPI 2008	SGS 4x CPI 2008
	Cents	Dollars	Dollars	Dollars
Sirloin Steak, pound	24.3	$2.00	$5.99	$7.99
Round Steak, pound	21.4	$1.76	$5.28	$7.04
Rib Roast, pound	20.3	$1.67	$5.01	$6.67
Chuck roast, pound	15.9	$1.31	$3.92	$5.23
Plate beef, pound	11.9	$0.98	$2.93	$3.91
Pork chops, pound	21.8	$1.79	$5.38	$7.17
Bacon, sliced, pound	32.6	$2.68	$8.04	$10.72
Ham. sliced, pound	32.2	$2.65	$7.94	$10.59
Lamb, leg of, pound	19.9	$1.64	$4.91	$6.54
Hens, pound	19.2	$1.58	$4.73	$6.31
Milk, quart	8	$0.66	$1.97	$2.63
Butter, pound	35.3	$2.90	$8.70	$11.61
Cheese, pound	25.7	$2.11	$6.34	$8.45
Lard, pound	15	$1.23	$3.70	$4.93
Eggs, dozen	30.4	$2.50	$7.50	$10.00
Bread, pound	6.1	$0.50	$1.50	$2.01
Flour, pound	2.9	$0.24	$0.72	$0.95
Cornmeal, pound	2.8	$0.23	$0.69	$0.92
Rice, pound	9	$0.74	$2.22	$2.96
Potatoes, pound	1.8	$0.15	$0.44	$0.59
Sugar, pound	5.2	$0.43	$1.28	$1.71
Tea, pound	55	$4.52	$13.56	$18.08
Coffee, pound	30.7	$2.52	$7.57	$10.09
Other web site data: gasoline, low	11	$0.90	$2.71	$3.62
gasoline, high	27	$2.22	$6.66	$8.88

Now, some prices are clearly skewed in either CPI or BLS stats, but by and large it seems SGS is skewed high whereas CPI is skewed low.

Exception: For those who shop at 'organic' stores, the SGS numbers might seem very reasonable :eek:

For me, the difference is that John Williams is just providing alternate data, whereas CPI is being used to justify (or not) Social Security COLA payments and whatnot.

This is what I mean by the mathematical differences not necessarily meaning that much - ultimately it is actual performance we need to gauge, not relative measuring sticks.

[qwerty]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

The biases which John Williams builds in are not wholly applied at the base item level of items like coffee. A lot of it is to do with hedonics, sustitution and re-weightings.

For example, if coffee goes up in price, you might find that in the "beverages" category, over time, there is less and less coffee (by weight) in the beverage index (these indexes are re-weighted every two years). So, beverages don't go up by as much as if the amount of coffee people drank remained constant. (I believe that if you look at the Meat category now and a few years ago, today the category comprises much, much less steak and a whole lot more luncheon meat.)

Also, for all we know the coffee we drink today may be be deemed by the BLS to be of superior quality to that drunk in 1980. This, by hedonic adjustment, would result in the real price of coffee being reduced to take account of this before being used to calculate today's CPI.

So, it's not enough to just look at today's price of 1lb of coffee and then apply an overall CPI All Items rate to it, whether it's the BLS's or SGS's.

[jk]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

The biases which John Williams builds in are not wholly applied at the base item level of items like coffee. A lot of it is to do with hedonics, sustitution and re-weightings.

For example, if coffee goes up in price, you might find that in the "beverages" category, over time, there is less and less coffee (by weight) in the beverage index (these indexes are re-weighted every two years). So, beverages don't go up by as much as if the amount of coffee people drank remained constant. (I believe that if you look at the Meat category now and a few years ago, today the category comprises much, much less steak and a whole lot more luncheon meat.)

Also, for all we know the coffee we drink today may be be deemed by the BLS to be of superior quality to that drunk in 1980. This, by hedonic adjustment, would result in the real price of coffee being reduced to take account of this before being used to calculate today's CPI.

So, it's not enough to just look at today's price of 1lb of coffee and then apply an overall CPI All Items rate to it, whether it's the BLS's or SGS's.

the cpi also uses geometric averaging instead of the arithmetic mean as another way of keeping the number down.

[sandwind]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

They will do what they failed to do in 1945. Real central bank of the world with fiat money. And gold ? Gold will be de-monetized not re-monetized. Gold as money is only a dream of people but nightmare for elites and government.... Who rules the world ?

[LargoWinch]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

They will do what they failed to do in 1945. Real central bank of the world with fiat money. And gold ? Gold will be de-monetized not re-monetized. Gold as money is only a dream of people but nightmare for elites and government.... Who rules the world ?

Maybe, but your "world central bank" will have to issue a new currency.

Hence, in fiat USD terms, gold will skyrocket (depreciated compare to this "new world" currency and gold), so the effect is the same: devaluation of a doomed fiat currency.

[sandwind]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

This is not "my world central bank" About it written Ludwig von Mises that there was a try to establish it in 1945 and now Ron Paul is talking that this can be elits plan. Yes I am quite sure that this can be the plan and the world is looking diffrent now so this can pass. The world central bank is allready here and have even own money (The Bank for International Settlements). Maybe they will use it maybe that will create new one. Those guys who will own it will be rule the earth. This bank will be creating reserve money for all countres and will decide about development of every of them. The question is if they will be able to make it real.

[LargoWinch]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

This is not "my world central bank" About it written Ludwig von Mises that there was a try to establish it in 1945 and now Ron Paul is talking that this can be elits plan. Yes I am quite sure that this can be the plan and the world is looking diffrent now so this can pass. The world central bank is allready here and have even own money (The Bank for International Settlements). Maybe they will use it maybe that will create new one. Those guys who will own it will be rule the earth. This bank will be creating reserve money for all countres and will decide about development of every of them. The question is if they will be able to make it real.

sandwind, I think you are missing my point. I am not a big fan of "new world order" stuff, but lets assume it happens:

First thing to remember, currently people's wealth are measured in fiat US bonars (or some other fiat currency), introducing "new money" (restarting the clock) would potentially spell disaster for holders of USD i.e. you would need a lot of USD for every one "new money" dollar.

Gold however would then skyrocket in USD terms as it cannot be "devalued". The market would then dictate the price of gold in "new money" terms (assuming free currency/gold markets). This is assuming a fiat "new world currency"; which is highly unlikely in my book by the way. The likely long-term scenario is a new currency backed by something, gold being the most likely candidate.

[Slimprofits]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Italian minister proposes "legal standard" for world economy

Giulio Tremonti [Italian economy minister] is proposing a moral-legal passport [as published] for the global economy. He has named it "Legal Standard [previous two words in English]," as a tribute to the "Gold Standard," the mechanism that used to link currencies to gold - a mechanism that in the post-war years was the guiding principle of the world economy.

[..]

Sarkozy wished to call this meeting in Paris in order to stimulate debate ahead of the G-20 that in April will attempt to launch the new "Bretton Woods." "Holding the presidency of the G-8 provides us with the opportunity to put forward suggestions," Tremonti added. The "Legal Standard" is one of them: it is aimed at establishing common values for the world economy, of which "finance is only a part," in order to clearly separate those who respect certain moral and legal principles and those who do not.

At the same time, the minister is considering a "shadow G-8" in which to discuss these matters "in a freer manner." Then there is the bizarre case of legal havens [as published], a world "that has taken advantage of deregulation in order to abandon rules." Why not act, then? "It is not easy, but it really should be done." Thereafter, he discussed the moratorium for all things toxic. Within financial institutions "there are healthy activities and others that are rotten, which should really be separated." Still as an "academic idea," Tremonti envisaged that "bad positions could be placed within tools that last for 50 years," so that they are left on the sidelines of the market and are thus defused. Derivatives are the main enemy, "they are worth 12.5 times the global GDP, and their real impact is unknown." He said that some things must be protected, and, hence, priority must be given to businesses and families. "Rescuing everything," the professor [Tremonti] admitted, "is a divine prerogative. It is best to focus on what is human."

Source: La Stampa website, Turin, in Italian 9 Jan 09

[bart]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

JT,

Sure, strictly speaking the SGS delta vs. CPI in the last 28 years should multiply straight through since cost up to 1980 is then increased by CPI or SGS numbers each year thereafter.

However, if SGS is truly correct, then you wind up with some truly eye popping numbers for various staples:

http://historicaltextarchive.com/sec...icle&artid=418

Using 1913 - 2008 via CPI = 822% increase, and comparing with SGS 3x and SGS 4x vs. CPI:

Article	1913	CPI 2008 price	SGS 3x CPI 2008	SGS 4x CPI 2008
	Cents	Dollars	Dollars	Dollars
Sirloin Steak, pound	24.3	$2.00	$5.99	$7.99
Round Steak, pound	21.4	$1.76	$5.28	$7.04
Rib Roast, pound	20.3	$1.67	$5.01	$6.67
Chuck roast, pound	15.9	$1.31	$3.92	$5.23
Plate beef, pound	11.9	$0.98	$2.93	$3.91
Pork chops, pound	21.8	$1.79	$5.38	$7.17
Bacon, sliced, pound	32.6	$2.68	$8.04	$10.72
Ham. sliced, pound	32.2	$2.65	$7.94	$10.59
Lamb, leg of, pound	19.9	$1.64	$4.91	$6.54
Hens, pound	19.2	$1.58	$4.73	$6.31
Milk, quart	8	$0.66	$1.97	$2.63
Butter, pound	35.3	$2.90	$8.70	$11.61
Cheese, pound	25.7	$2.11	$6.34	$8.45
Lard, pound	15	$1.23	$3.70	$4.93
Eggs, dozen	30.4	$2.50	$7.50	$10.00
Bread, pound	6.1	$0.50	$1.50	$2.01
Flour, pound	2.9	$0.24	$0.72	$0.95
Cornmeal, pound	2.8	$0.23	$0.69	$0.92
Rice, pound	9	$0.74	$2.22	$2.96
Potatoes, pound	1.8	$0.15	$0.44	$0.59
Sugar, pound	5.2	$0.43	$1.28	$1.71
Tea, pound	55	$4.52	$13.56	$18.08
Coffee, pound	30.7	$2.52	$7.57	$10.09
Other web site data: gasoline, low	11	$0.90	$2.71	$3.62
gasoline, high	27	$2.22	$6.66	$8.88

Now, some prices are clearly skewed in either CPI or BLS stats, but by and large it seems SGS is skewed high whereas CPI is skewed low.

Exception: For those who shop at 'organic' stores, the SGS numbers might seem very reasonable :eek:

For me, the difference is that John Williams is just providing alternate data, whereas CPI is being used to justify (or not) Social Security COLA payments and whatnot.

This is what I mean by the mathematical differences not necessarily meaning that much - ultimately it is actual performance we need to gauge, not relative measuring sticks.

I submit that your observation about those shopping at 'organic' stores and how close the adjusted prices are is much more important than you seem to be implying, and also indicate that SGS CPI numbers are quite close to actual reality on an apples to apples comparison basis.

Those 'organic' meats or eggs are directly comparable to the meats of 1913, whereas standard supermarket meats include things like hormones, irradiation, minimal grass or pasture feeding, etc. Whatever one think about grass fed beef and its advantages, comparing 'factory' beef prices against 'organic' isn't valid on the very long term.

Plus, all John Williams is doing is doing the calculations like they were done in 1982 or so... so if they're too high now, then they were too high then.

[Willette]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

As a new member, I'm catching up on some of EJs past thoughts. Oh, how I wish I had caught on to iTulip a few years ago! This is excellent stuff.

The easiest way for the government to squeeze holders of gold and silver is simply to squeeze the few and powerless gold and silver dealers. They are unorganized and politically insignificant. Something as simple as X% withholding by dealers on the proceeds of all purchases from retail customers, to make sure that your sale shows up on your tax return, coupled with any variety of punitive taxes on "windfall profits" (well worn justification), would put a big crimp in most of our plans. Hence the predicted rise of the black market.

We need to remember that a major reason for the rise of irredeemable currency is that it allows deficit spending without visible tax increases, resulting in a bubble in government. Unlimited ability to spend means unlimited government. Unlike financial bubbles, it usually takes armed force or total collapse or both to pop a bubble in government.

Although EJ says that the gold standard would be only for international payments (I think he means government-to-government), the lack of circulating gold coin domestically means that governments will continue to grow by issuing currency domestically, and so you will still have competitive devaluation between currencies, leading back to where we are today. This is why a One World currency franchise operated by the invisible PTB is in our future.

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

I submit that your observation about those shopping at 'organic' stores and how close the adjusted prices are is much more important than you seem to be implying, and also indicate that SGS CPI numbers are quite close to actual reality on an apples to apples comparison basis.

Those 'organic' meats or eggs are directly comparable to the meats of 1913, whereas standard supermarket meats include things like hormones, irradiation, minimal grass or pasture feeding, etc. Whatever one think about grass fed beef and its advantages, comparing 'factory' beef prices against 'organic' isn't valid on the very long term.

Plus, all John Williams is doing is doing the calculations like they were done in 1982 or so... so if they're too high now, then they were too high then.

Bart,

It is an interesting concept that the 'organic' supermarket fare is closer to what was available in 1913.

The problem I have with that is this argument ignores the nearly century of livestock improvement via breeding, mechanization of farming, scientific understanding of agriculture, hybrid seeds, and a host of other factors. This is like saying all food today, hence food prices, are hedonically different than 1913.

This is true on some level, but then again, food is food.

As for 1982 calculations being too high - that isn't out of the realm of possibility. After all, when you're doing a 'smackdown' on inflation a la Volcker, wouldn't you want higher numbers?

[bart]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Bart,

It is an interesting concept that the 'organic' supermarket fare is closer to what was available in 1913.

The problem I have with that is this argument ignores the nearly century of livestock improvement via breeding, mechanization of farming, scientific understanding of agriculture, hybrid seeds, and a host of other factors. This is like saying all food today, hence food prices, are hedonically different than 1913.

This is true on some level, but then again, food is food.

It's true that I'm playing a little fast & loose with that organic comparison. This is also an area where raw facts aren't in abundance and value judgments have to be made... but I also suggest that the items you mention like breeding, hybrids etc. are actually reflected in organic beef and other foods of today too. Organic farmers have learned and applied a lot of the positive changes since 1913 in their own businesses too... and the prices still reflect that Williams corrections are closer to the real truth than not... and without getting into the very complex and emotionally hot areas like actual food value differences between "heirloom" and GMO seeds for example.

The same relationships hold true on many other things like furniture too. The solid wood high quality dining table of today also compares to those of 1913, using Williams corrections to the CPI rather than the CPI alone.

As for 1982 calculations being too high - that isn't out of the realm of possibility. After all, when you're doing a 'smackdown' on inflation a la Volcker, wouldn't you want higher numbers?

CPI was about 5% in 1982 and 13% in 1980, and Williams corrections today are either about +4% (post Clinton) or about +7% (SGS). I frankly can't imagine using those corrections in either of those years, nor that either 5% or 12% were low since I actually lived through and ran a business during the period.

I urge you to actually read about what John Williams is doing with his corrections directly from the public writings on his site, and what the government has done to them - if you haven't already.


And here's something from the definition of hedonics in my glossary, neither of which are sourced from shadowstats:

"Using BLS statistics, health care costs are about 17.5% of consumption, but it is weighted much less in the CPI calculation. Healthcare is 4.6% of CPI; healthcare commodities are 1.5% of CPI. Healthcare is reportedly 15 to 17% of GDP. This presents a huge discrepancy in CPI weighting. If CPI healthcare costs were in tune with reality AND they had an accurate weighting, CPI would be substantially greater"

There is also something called "substitution bias" that is used by the US Bureau of Labor Statistics to falsely adjust the CPI. One example is meats like beef, chicken or pork. If beef price goes up a lot and chicken doesn't, the BLS assumes that more chicken is bought and adjusts the food portion of the index. This is a false activity, even though it may reflect what people actually do, since it prevents valid longer term comparisons due to the actual index having different things in it over time. Its also false since it hides the price rise in beef. Another example is cars - if SUV prices go up a lot and smaller cars don't, the BLS assumes more smaller cars are bought. This is also false since it also hides that the standard of living is going down - eating chicken instead of beef, or buying smaller cars is generally considered to be evidence of a lower standard of living (setting aside any political or environmental type issues).
Source 1 Source 2

[raja]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Bart,

It is an interesting concept that the 'organic' supermarket fare is closer to what was available in 1913.

The problem I have with that is this argument ignores the nearly century of livestock improvement via breeding, mechanization of farming, scientific understanding of agriculture, hybrid seeds, and a host of other factors. This is like saying all food today, hence food prices, are hedonically different than 1913.

This is true on some level, but then again, food is food.

As for 1982 calculations being too high - that isn't out of the realm of possibility. After all, when you're doing a 'smackdown' on inflation a la Volcker, wouldn't you want higher numbers?

Much of the "improvements" in farming were inspired by economics rather than hedonics, e.g., foods that last longer on the store shelves because of chemical additives, vegetables bred to withstand the rigors of shipping better, and produce that ripens at optimal rates for marketability. Livestock are given routine antibiotics to combat frequent infections cause by feedlot conditions, cows are given hormones to boost milk production, and chickens must be de-beaked due to being forced to live in crowded conditions.

Many small farmers choose "heirloom" seeds and traditional farming practices, claiming that food produced in more "natural" ways is superior in taste. Of course, there's no accounting for taste so I wouldn't want to debate this point.

[Redwoods]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

The science behind the health advantages of "traditional nutrient dense foods" can be found from Dr. Weston A Price, The Weston A Price Foundation, http://westonaprice.org/

My opinion: what Eric J/iTulip is to our finances, Weston A Price is to our food choices as it relates to our physical health. Yes, strong endorsement!

------------------

The Weston A. Price Foundation is a nonprofit, tax-exempt charity founded in 1999 to disseminate the research of nutrition pioneer Dr. Weston Price, whose studies of isolated nonindustrialized peoples established the parameters of human health and determined the optimum characteristics of human diets. Dr. Price's research demonstrated that humans achieve perfect physical form and perfect health generation after generation only when they consume nutrient-dense whole foods and the vital fat-soluble activators found exclusively in animal fats.