Also from the Golden Sextant web site of Reg Howell:Crimson and Gold: Ivy League Suit Test
It used to be said that a good man's suit could be purchased for one ounce of gold. Today a Campagna suit runs
anywhere from $3400 to $12,000, with a ready-to-wear line soon to be introduced starting at a mere $3000. "The
Man with the Golden Needle," Forbes, Jan. 24, 2000, p. 171. The Andover Shop in Harvard Square, long a vendor
of suits to budding young executives headed for their first job interviews, today offers suits on-sale at prices ranging
from $500 to $1000.
If Harvard undergrads are finding even their relatively cheaper suits historically expensive in terms of gold, what about
the cost of their education?
When my father entered Harvard in 1933, the full cost of attending for one year (i.e., tuition, room, board, books,
etc.) was about $1000, or almost 50 ounces of gold (1000/20.67). Four years later, the dollar cost remained about
the same but the cost in gold had been reduced to less than 30 ounces (1000/35). When I was at Harvard in the
1960's, the total cost of one year was around $3000, or 86 ounces of gold (3000/35). Later events suggest that even
by that date the fixed $35/oz. gold price had become fundamentally untenable, and a gold price of about $60/oz.
would have been more realistic. It also would have brought the cost in gold back to 50 ounces, the same as when my
father entered before the demise of the gold standard. Today I'm told that the full cost of one year at Harvard is about
$30,000, or about 110 ounces of gold at $275/oz. To bring the gold cost down to 50 ounces would require a gold
price of $600/oz. (with the dollar price kept constant at $30,000).
On the other hand, adjusting $1000 from 1933 and $3000 from 1965 using the CPI gives around $13,000 and
$16,000, respectively, in current dollars. See www.aier.org/colcalc.html. Similarly adjusting the $20.67/oz. gold price
from 1913, the last year before the distortions caused by World War I and subsequent events upset an equilibrium
price that had prevailed for more than a century, gives about $350/oz. in current dollars. Using this price, one year at
Harvard costing 50 ounces of gold would equate to $17,500. Measured on a cost-of-living basis, then, the total cost
of one year at Harvard today ought to be not much over half of what it is.
Even if Harvard is the gold standard of education (a proposition that not everyone admits), its prices are fairly
representative of many good schools and colleges. The full cost of one year at any of them involves an amalgam of
prices for a very broad array of goods and services. But like a suit, the end product has remained pretty much
unchanged in function and purpose through the years. If the price of a suit or a college education can appreciate at
almost twice the rate of the CPI, there is no obvious reason why the price of gold should not rise at a similar rate.
Interestingly, a price of $500 to $600 per ounce is what some analysts claim would now be necessary to bring gold
demand and annual new mine production back into equilibrium. It would also bring the cost of a suit (albeit a cheap
one) and a year at college back into more normal ratios with gold. |
