Heinz,
1. Day 1, 1 oz of gold = $1 = a McDonald's big meal (say).
2. Day 2, a McDonald's big meal = 50 cents (in a deflation), 1 oz of gold = $2 (POG going up, as you claim).
Now, unless the intrinsic value of a McDonald's big meal has gone down, or the intrinsic value of an oz of gold has gone up, this is not possible. So, which intrinsic value changed? Food, or commodities? My understanding is that both are fairly stable as far as intrinsic value goes.
Of course, this following option is clearly viable:
2. Day 2, a McDonald's big meal = $2 (in an inflation), 1 oz of gold = $2 (POG going up, as happens during an inflation). Intrinsic values for both food and commodities remain stable.
-BGR. |
