Snow, there isn't enough gold in the world for more than a few smaller countries to go onto a gold standard. Well, there is enough gold, but the gold would have to be about $10,000 an ounce. At that price, gold would become a huge drain on the economy as umpty millions of people would stop doing useful things and start digging gold, filtering it out of the ocean, or spending their days robbing people of their gold.
The reason gold got to the previous world record price due to the second oil price quadrupling in 1979 was that at the time, that was a huge event.
Most people are too young to remember it or didn't experience it other than in petrol prices. That followed the previous quadrupling of 1974.
In the 1970s, the size of oil in the USA and global economy was huge. General Motors and the Seven Sisters bestrode the Earth. As did all sorts of economic activity requiring oil and LOTS of it.
Now, oil is a small part of the world's economy. That's why $100 a barrel came along after oil being about $10 less than 10 years ago. Here's a good graph of oil price. Note that it is in 2006 dollars rather than dollars of the day. wtrg.com
The oil price is still lower than the previous peak. So really, it's all a big yawn. We have seen it before.
Oil is going to come way down in price, because the alternatives are now so much cheaper, so they will continue to grow until oil prices are once again competitive. Gold will also go down in price once the panics about fiat currencies are over. Gold is worth the cost of production. Same as oil. Any prices above that are temporary while people adjust their economic activity to suit.
Here is some gold history: taxfreegold.co.uk Note that in ten years, gold went from $35 an ounce to nearly $900 an ounce, while oil went from $2 a barrel to $40 a barrel in the same time. Remember, that was when oil was a big deal.
The recent moves are small by comparison = from $270 and ounce to nearly $900 an ounce and from $10 a barrel to $100 a barrel [at a time when oil is half as important in the economy].
The big issue is debt and the political outcome of sorting out that debt. We have already seen politicians keen to wade into the mess and "do something", which of course involves robbing savers and rewarding the borrowers as is traditional.
2008 has a lucky number in it for China [and might turn out to be that way for them] but is not lined up to be too lucky for people in heavy debt, or their creditors.
Mqurice |
