DarkRange55
We are now gods but for the wisdom
- Oct 15, 2023
- 2,059
Clothing Expansion (4 additional paragraphs)
In Rome, the symbolism of clothing reinforced gold's purchasing power. The toga, reserved for Roman citizens, was expensive not only because of fabric but because of the legal status it represented. A toga could cost 15–20 denarii, a fraction of an aureus, yet it was accessible only to free citizens. This meant that gold, in sufficient quantity, was a gateway to dignity and legal recognition in society. Soldiers like centurions could easily afford multiple togas and cloaks with their annual ~38 oz pay, cementing gold's role as the currency of status as well as necessity.
Another dimension of Roman clothing was the military uniform itself. Centurions received stipends for armor and equipment, but out-of-pocket upgrades were common. Bronze or iron armor, leather belts with ornate fittings, and quality sandals could be purchased with fractions of an aureus. Thus, gold didn't just buy civilian clothing but also military respectability — an ounce or two could upgrade one's appearance dramatically, signaling authority in both civic and martial contexts.
Fast-forward to the 1890s United States, and clothing similarly reflected respectability. The industrial revolution had democratized textiles, but a truly well-tailored wool suit remained a mark of social standing. At ~$20 — nearly identical to the $20.67/oz gold peg — a suit was both affordable to the growing middle class and aligned almost perfectly with the ounce. This near-literal match is why the "nice suit" heuristic stuck so strongly in modern imagination: here was a time when the metaphor became a measurable truth.
In the modern era, the suit continues to signal dignity. A $2,500 Armani or bespoke tailored suit reflects not just cost of materials but also craft and prestige. That one ounce of gold at ~$2,000–$2,500 can still buy such an outfit shows the deep cultural continuity: gold maps onto socially recognized respectability. While fashions shift — from togas to wool suits to Armani — the purchasing power of gold in terms of socially respectable attire has been strikingly constant.
⸻
Bread Expansion (2 additional paragraphs)
Bread has also been used as an explicit measure of inflation over time. Economists often track a "bread index" alongside wages. In Roman Egypt, papyri record grain rations, showing how soldiers' stipends converted into loaves. A single denarius could buy dozens of loaves, reinforcing that gold-backed pay translated into real caloric security. This linkage was political: emperors maintained the annona because bread riots threatened stability, making gold's exchange into bread as much a matter of governance as economics.
In the 20th century, bread became a benchmark in crises. During Weimar Germany's hyperinflation, bakers famously raised prices multiple times a day. Gold owners could protect themselves, but workers paid in paper could not. By contrast, during the 1970s stagflation in the U.S., bread doubled in cost — from ~25¢ to ~50¢ — but gold rose tenfold, from $35/oz to nearly $400/oz. This meant that in bread terms, gold didn't just preserve parity; it actually gained purchasing power, underscoring why it's seen as a hedge during inflationary shocks.
Part I-B (Half 2/2): The Golden Constant and Gold's Purchasing Power
⸻
7. Inflationary Episodes: Gold's Strength
7.1 The United States, 1970s
The U.S. in the 1970s is one of the clearest demonstrations of gold's strength in inflationary conditions. After President Nixon suspended gold convertibility in 1971, inflation surged, fueled by oil shocks and loose monetary policy. Consumer prices more than doubled between 1971 and 1980, with annual inflation peaking at ~14%.
Gold responded with explosive gains. From $35/oz in 1971, it rose to over $850/oz by January 1980. Adjusted for inflation, this was a more than 600% real return in less than a decade. Bread prices doubled, gasoline quadrupled, but gold outpaced them all. This cemented the idea of gold as a hedge during fiat debasement.
Yet the episode also illustrates volatility. By the mid-1980s, gold had collapsed to ~$300/oz, wiping out much of the speculative froth. Those who bought late paid dearly. The lesson: gold hedges best when bought before crises, not during peaks of panic.
⸻
7.2 Weimar Germany, 1920s
The classic hyperinflation case is Weimar Germany (1921–1923). Reparations, money-printing, and collapse of confidence led to inflation rates measured in the billions of percent. Workers were paid twice daily, and bakers raised prices between sunrise and sunset.
Gold performed extraordinarily. An ounce that had been worth 170 marks before the war eventually traded for 20 trillion marks. Those who held gold or foreign currencies preserved wealth; those who held paper savings were wiped out. In bread terms, a gold coin could buy an entire bakery's output, while marks could not buy a single loaf.
The Weimar case illustrates gold's unique ability to serve as a currency of last resort. Its portability, anonymity, and universal acceptance meant that holders could ride out total fiat collapse. The lesson spread worldwide: in extreme inflation, gold protects absolutely.
⸻
7.3 Soviet Russia, 1920s
After the Bolshevik Revolution, Russia experienced a severe inflationary collapse. Between 1917 and 1924, the ruble lost virtually all value. War, civil conflict, and requisitioning destroyed confidence in paper money.
Gold and silver coins became lifelines. The government itself resorted to issuing "chervonets," a gold-backed coin, to stabilize the currency. Farmers and traders preferred gold jewelry or foreign gold coins to rubles, and cross-border trade relied heavily on bullion.
Here gold functioned not just as a hedge but as a parallel economy. Ordinary Russians who held gold wedding bands or coins survived far better than those who depended on salaries in paper rubles.
⸻
7.4 Hungary, 1945–46
Hungary endured the worst hyperinflation in history. Between August 1945 and July 1946, the pengő currency depreciated so quickly that prices doubled every 15 hours. The largest note issued was 100 quintillion pengő.
Gold again preserved purchasing power. A few ounces could purchase houses or farmland when converted into stable foreign currency. Families that had hidden gold jewelry during the war emerged with wealth intact, while cash savings evaporated.
Hungary's hyperinflation illustrates the extreme: in the worst possible fiat collapse, gold outperformed everything else, serving as the bridge between collapse and post-inflation stabilization.
⸻
7.5 Greece, WWII Occupation
During WWII, Nazi occupation devastated the Greek economy. The drachma lost nearly all value as authorities printed currency to pay expenses. Inflation reached 10 billion percent between 1941 and 1944.
Gold sovereigns, especially British coins, became the preferred medium of exchange. Entire black markets functioned in sovereigns, which retained stable purchasing power. A few coins could feed a family for months, while drachmae became worthless.
This episode highlights gold's portability and international credibility. Even in occupied Greece, a foreign gold coin circulated with trust, proving gold's strength as a supra-national asset.
⸻
7.6 Brazil, 1980s–1990s
Brazil experienced chronic inflation in the late 20th century, often above 1,000% annually. Prices changed daily, and multiple failed currencies (cruzeiro, cruzado, real) came and went.
Gold preserved value in local terms. However, international equities and U.S. bonds often did better in real terms. Studies (Erb & Harvey, 2013) note that while gold beat Brazilian paper, it did not outperform diversified global assets.
This illustrates a caveat: in chronic but not total hyperinflation, gold is helpful but not always the top performer. Accessibility, not returns, is its main value.
⸻
7.7 Argentina, 1980s–2000s
Argentina has suffered repeated bouts of inflation and devaluation. In the 1980s, annual inflation exceeded 3,000%. Again in 2001, the peso collapsed.
Gold preserved wealth domestically. However, Argentines who could move money abroad into dollars or real estate often fared better. Gold was a hedge, but capital flight into hard foreign assets could be superior.
This underscores the role of capital controls. Where governments restrict dollar access, gold shines. Where dollars are accessible, gold's relative advantage narrows.
⸻
7.8 Peru, 1980s
Peru's 1980s hyperinflation destroyed the inti. Annual inflation topped 7,000% in 1990. Salaries collapsed daily in real terms.
Gold and silver jewelry functioned as barter. Households that held precious metals could buy food and essentials when the currency failed. The U.S. dollar eventually replaced the inti, but gold bridged the gap during collapse.
⸻
7.9 Yugoslavia, 1990s
The breakup of Yugoslavia triggered hyperinflation in Serbia (1992–94). Inflation peaked at 313 million percent per month.
Gold coins and jewelry were widely used to buy food, medicine, and transport. As in Greece and Weimar, gold substituted for money itself. An ounce of gold could buy farmland or several months' worth of supplies.
⸻
7.10 Zimbabwe, 2000s
Zimbabwe's collapse is legendary. By 2008, inflation reached 79.6 billion percent per month. Salaries became worthless within hours.
Gold became the survival currency. Zimbabweans panned rivers for flakes and used tiny amounts of gold to buy bread and bus tickets. This shows gold's divisibility: even specks had value when fiat collapsed.
⸻
7.11 Venezuela, 2010s–2020s
Venezuela has endured inflation rates above 1,000,000% annually since 2016. The bolívar has been redenominated multiple times.
Gold preserved wealth, but U.S. dollars and real estate in Miami often did better for elites. Ordinary Venezuelans relied on gold jewelry for survival purchases. Again, gold functioned as accessible insurance, not as the highest return.
⸻
7.12 Lebanon, 2019–Present
Lebanon's financial collapse destroyed bank deposits and devalued the lira. Inflation topped 200% annually by 2021.
Gold jewelry, especially inherited pieces, became a lifeline. Families pawned or sold items to buy food. As banks imposed capital controls, gold offered liquidity that the financial system denied.
⸻
7.13 Turkey, 2018–Present
Turkey has faced persistent inflation, often 40–80% annually. While not hyperinflation, it erodes savings rapidly.
Turks traditionally save in gold coins (Republic gold). These held value far better than lira deposits. However, dollar savings sometimes outperformed depending on timing.
Gold's cultural role in dowries and savings preserved its trustworthiness, keeping it a core hedge.
⸻
7.14 Vietnam, 1980s–1990s
Vietnam suffered inflation exceeding 700% annually in the late 1980s. Salaries collapsed in real terms.
Gold bars, known as "SJC" bars, circulated as shadow money. Land and housing were often priced in gold rather than dong. Even after stabilization, gold remained a reference unit.
⸻
8. Deflationary Episodes: Gold's Weakness
8.1 The Long Depression, 1870s–1890s
Global deflation after 1873 cut prices by ~30%. Gold, fixed to currencies, held nominal value but lost relative purchasing power. Farmers and debtors suffered as debts became harder to repay. Gold-backed money caused deflationary rigidity.
8.2 The Great Depression, 1930s
The gold standard worsened deflation. Prices fell 25% in the U.S. between 1929 and 1933. Gold's fixed price meant it did not rise to offset falling incomes. Only after Roosevelt devalued the dollar against gold in 1933 did relief come.
8.3 Post-Civil War U.S., 1870s
The U.S. returned to gold convertibility in 1879 after years of "greenbacks." The deflation of the 1870s punished debtors and farmers. Gold was stable but rigid, locking the economy into falling prices.
8.4 Gold Slump, 1980–1999
After its 1980 peak at $850, gold collapsed to ~$250. Adjusted for inflation, this was a ~70% loss. Investors endured two decades of stagnation. Stocks and bonds far outperformed.
8.5 Meiji Japan, Late 1800s
Japan's adoption of the gold standard led to deflation. Prices fell, wages stagnated, and the economy slowed. Gold stability became economic rigidity.
8.6 Japan's Lost Decade, 1990s
During deflation in the 1990s, gold did little. Prices fell, but gold remained flat. Equities collapsed, but cash retained purchasing power. Gold provided little help in a deflationary spiral.
⸻
9. Regional Variations and Caveats
Gold's constancy is statistical, not exact. In Rome, subsidies distorted bread prices. In India, gold was hoarded in temples, reducing circulation. In Ming China, silver dominated, and gold's role fluctuated. In Turkey, dowry savings preserved gold's cultural role.
Staple foods varied: bread in Europe, rice in Asia, maize in the Americas. But across these, an ounce of gold consistently bought core calories.
Cultural practices also mattered. In India and Vietnam, jewelry served as savings. In Europe, coins circulated more. These differences show that the "constant" is not uniform but adapted to context.
⸻
10. The Lesson of the Golden Constant
The cumulative lesson of Jastram, Leyland, and Erb & Harvey is clear: gold preserves but does not compound.
It is insurance, not growth. An ounce has bought dignity in clothing and food for 2,000 years. But it does not multiply wealth like equities. Investors who bought gold in 1980 or 2011 learned this the hard way.
Central banks hold ~36,000 tonnes of gold not for yield but for survival. Families pass down jewelry not to enrich heirs but to ensure they are never destitute. This is the true golden constant: across empires and crises, gold guarantees continuity.
In Rome, the symbolism of clothing reinforced gold's purchasing power. The toga, reserved for Roman citizens, was expensive not only because of fabric but because of the legal status it represented. A toga could cost 15–20 denarii, a fraction of an aureus, yet it was accessible only to free citizens. This meant that gold, in sufficient quantity, was a gateway to dignity and legal recognition in society. Soldiers like centurions could easily afford multiple togas and cloaks with their annual ~38 oz pay, cementing gold's role as the currency of status as well as necessity.
Another dimension of Roman clothing was the military uniform itself. Centurions received stipends for armor and equipment, but out-of-pocket upgrades were common. Bronze or iron armor, leather belts with ornate fittings, and quality sandals could be purchased with fractions of an aureus. Thus, gold didn't just buy civilian clothing but also military respectability — an ounce or two could upgrade one's appearance dramatically, signaling authority in both civic and martial contexts.
Fast-forward to the 1890s United States, and clothing similarly reflected respectability. The industrial revolution had democratized textiles, but a truly well-tailored wool suit remained a mark of social standing. At ~$20 — nearly identical to the $20.67/oz gold peg — a suit was both affordable to the growing middle class and aligned almost perfectly with the ounce. This near-literal match is why the "nice suit" heuristic stuck so strongly in modern imagination: here was a time when the metaphor became a measurable truth.
In the modern era, the suit continues to signal dignity. A $2,500 Armani or bespoke tailored suit reflects not just cost of materials but also craft and prestige. That one ounce of gold at ~$2,000–$2,500 can still buy such an outfit shows the deep cultural continuity: gold maps onto socially recognized respectability. While fashions shift — from togas to wool suits to Armani — the purchasing power of gold in terms of socially respectable attire has been strikingly constant.
⸻
Bread Expansion (2 additional paragraphs)
Bread has also been used as an explicit measure of inflation over time. Economists often track a "bread index" alongside wages. In Roman Egypt, papyri record grain rations, showing how soldiers' stipends converted into loaves. A single denarius could buy dozens of loaves, reinforcing that gold-backed pay translated into real caloric security. This linkage was political: emperors maintained the annona because bread riots threatened stability, making gold's exchange into bread as much a matter of governance as economics.
In the 20th century, bread became a benchmark in crises. During Weimar Germany's hyperinflation, bakers famously raised prices multiple times a day. Gold owners could protect themselves, but workers paid in paper could not. By contrast, during the 1970s stagflation in the U.S., bread doubled in cost — from ~25¢ to ~50¢ — but gold rose tenfold, from $35/oz to nearly $400/oz. This meant that in bread terms, gold didn't just preserve parity; it actually gained purchasing power, underscoring why it's seen as a hedge during inflationary shocks.
Part I-B (Half 2/2): The Golden Constant and Gold's Purchasing Power
⸻
7. Inflationary Episodes: Gold's Strength
7.1 The United States, 1970s
The U.S. in the 1970s is one of the clearest demonstrations of gold's strength in inflationary conditions. After President Nixon suspended gold convertibility in 1971, inflation surged, fueled by oil shocks and loose monetary policy. Consumer prices more than doubled between 1971 and 1980, with annual inflation peaking at ~14%.
Gold responded with explosive gains. From $35/oz in 1971, it rose to over $850/oz by January 1980. Adjusted for inflation, this was a more than 600% real return in less than a decade. Bread prices doubled, gasoline quadrupled, but gold outpaced them all. This cemented the idea of gold as a hedge during fiat debasement.
Yet the episode also illustrates volatility. By the mid-1980s, gold had collapsed to ~$300/oz, wiping out much of the speculative froth. Those who bought late paid dearly. The lesson: gold hedges best when bought before crises, not during peaks of panic.
⸻
7.2 Weimar Germany, 1920s
The classic hyperinflation case is Weimar Germany (1921–1923). Reparations, money-printing, and collapse of confidence led to inflation rates measured in the billions of percent. Workers were paid twice daily, and bakers raised prices between sunrise and sunset.
Gold performed extraordinarily. An ounce that had been worth 170 marks before the war eventually traded for 20 trillion marks. Those who held gold or foreign currencies preserved wealth; those who held paper savings were wiped out. In bread terms, a gold coin could buy an entire bakery's output, while marks could not buy a single loaf.
The Weimar case illustrates gold's unique ability to serve as a currency of last resort. Its portability, anonymity, and universal acceptance meant that holders could ride out total fiat collapse. The lesson spread worldwide: in extreme inflation, gold protects absolutely.
⸻
7.3 Soviet Russia, 1920s
After the Bolshevik Revolution, Russia experienced a severe inflationary collapse. Between 1917 and 1924, the ruble lost virtually all value. War, civil conflict, and requisitioning destroyed confidence in paper money.
Gold and silver coins became lifelines. The government itself resorted to issuing "chervonets," a gold-backed coin, to stabilize the currency. Farmers and traders preferred gold jewelry or foreign gold coins to rubles, and cross-border trade relied heavily on bullion.
Here gold functioned not just as a hedge but as a parallel economy. Ordinary Russians who held gold wedding bands or coins survived far better than those who depended on salaries in paper rubles.
⸻
7.4 Hungary, 1945–46
Hungary endured the worst hyperinflation in history. Between August 1945 and July 1946, the pengő currency depreciated so quickly that prices doubled every 15 hours. The largest note issued was 100 quintillion pengő.
Gold again preserved purchasing power. A few ounces could purchase houses or farmland when converted into stable foreign currency. Families that had hidden gold jewelry during the war emerged with wealth intact, while cash savings evaporated.
Hungary's hyperinflation illustrates the extreme: in the worst possible fiat collapse, gold outperformed everything else, serving as the bridge between collapse and post-inflation stabilization.
⸻
7.5 Greece, WWII Occupation
During WWII, Nazi occupation devastated the Greek economy. The drachma lost nearly all value as authorities printed currency to pay expenses. Inflation reached 10 billion percent between 1941 and 1944.
Gold sovereigns, especially British coins, became the preferred medium of exchange. Entire black markets functioned in sovereigns, which retained stable purchasing power. A few coins could feed a family for months, while drachmae became worthless.
This episode highlights gold's portability and international credibility. Even in occupied Greece, a foreign gold coin circulated with trust, proving gold's strength as a supra-national asset.
⸻
7.6 Brazil, 1980s–1990s
Brazil experienced chronic inflation in the late 20th century, often above 1,000% annually. Prices changed daily, and multiple failed currencies (cruzeiro, cruzado, real) came and went.
Gold preserved value in local terms. However, international equities and U.S. bonds often did better in real terms. Studies (Erb & Harvey, 2013) note that while gold beat Brazilian paper, it did not outperform diversified global assets.
This illustrates a caveat: in chronic but not total hyperinflation, gold is helpful but not always the top performer. Accessibility, not returns, is its main value.
⸻
7.7 Argentina, 1980s–2000s
Argentina has suffered repeated bouts of inflation and devaluation. In the 1980s, annual inflation exceeded 3,000%. Again in 2001, the peso collapsed.
Gold preserved wealth domestically. However, Argentines who could move money abroad into dollars or real estate often fared better. Gold was a hedge, but capital flight into hard foreign assets could be superior.
This underscores the role of capital controls. Where governments restrict dollar access, gold shines. Where dollars are accessible, gold's relative advantage narrows.
⸻
7.8 Peru, 1980s
Peru's 1980s hyperinflation destroyed the inti. Annual inflation topped 7,000% in 1990. Salaries collapsed daily in real terms.
Gold and silver jewelry functioned as barter. Households that held precious metals could buy food and essentials when the currency failed. The U.S. dollar eventually replaced the inti, but gold bridged the gap during collapse.
⸻
7.9 Yugoslavia, 1990s
The breakup of Yugoslavia triggered hyperinflation in Serbia (1992–94). Inflation peaked at 313 million percent per month.
Gold coins and jewelry were widely used to buy food, medicine, and transport. As in Greece and Weimar, gold substituted for money itself. An ounce of gold could buy farmland or several months' worth of supplies.
⸻
7.10 Zimbabwe, 2000s
Zimbabwe's collapse is legendary. By 2008, inflation reached 79.6 billion percent per month. Salaries became worthless within hours.
Gold became the survival currency. Zimbabweans panned rivers for flakes and used tiny amounts of gold to buy bread and bus tickets. This shows gold's divisibility: even specks had value when fiat collapsed.
⸻
7.11 Venezuela, 2010s–2020s
Venezuela has endured inflation rates above 1,000,000% annually since 2016. The bolívar has been redenominated multiple times.
Gold preserved wealth, but U.S. dollars and real estate in Miami often did better for elites. Ordinary Venezuelans relied on gold jewelry for survival purchases. Again, gold functioned as accessible insurance, not as the highest return.
⸻
7.12 Lebanon, 2019–Present
Lebanon's financial collapse destroyed bank deposits and devalued the lira. Inflation topped 200% annually by 2021.
Gold jewelry, especially inherited pieces, became a lifeline. Families pawned or sold items to buy food. As banks imposed capital controls, gold offered liquidity that the financial system denied.
⸻
7.13 Turkey, 2018–Present
Turkey has faced persistent inflation, often 40–80% annually. While not hyperinflation, it erodes savings rapidly.
Turks traditionally save in gold coins (Republic gold). These held value far better than lira deposits. However, dollar savings sometimes outperformed depending on timing.
Gold's cultural role in dowries and savings preserved its trustworthiness, keeping it a core hedge.
⸻
7.14 Vietnam, 1980s–1990s
Vietnam suffered inflation exceeding 700% annually in the late 1980s. Salaries collapsed in real terms.
Gold bars, known as "SJC" bars, circulated as shadow money. Land and housing were often priced in gold rather than dong. Even after stabilization, gold remained a reference unit.
⸻
8. Deflationary Episodes: Gold's Weakness
8.1 The Long Depression, 1870s–1890s
Global deflation after 1873 cut prices by ~30%. Gold, fixed to currencies, held nominal value but lost relative purchasing power. Farmers and debtors suffered as debts became harder to repay. Gold-backed money caused deflationary rigidity.
8.2 The Great Depression, 1930s
The gold standard worsened deflation. Prices fell 25% in the U.S. between 1929 and 1933. Gold's fixed price meant it did not rise to offset falling incomes. Only after Roosevelt devalued the dollar against gold in 1933 did relief come.
8.3 Post-Civil War U.S., 1870s
The U.S. returned to gold convertibility in 1879 after years of "greenbacks." The deflation of the 1870s punished debtors and farmers. Gold was stable but rigid, locking the economy into falling prices.
8.4 Gold Slump, 1980–1999
After its 1980 peak at $850, gold collapsed to ~$250. Adjusted for inflation, this was a ~70% loss. Investors endured two decades of stagnation. Stocks and bonds far outperformed.
8.5 Meiji Japan, Late 1800s
Japan's adoption of the gold standard led to deflation. Prices fell, wages stagnated, and the economy slowed. Gold stability became economic rigidity.
8.6 Japan's Lost Decade, 1990s
During deflation in the 1990s, gold did little. Prices fell, but gold remained flat. Equities collapsed, but cash retained purchasing power. Gold provided little help in a deflationary spiral.
⸻
9. Regional Variations and Caveats
Gold's constancy is statistical, not exact. In Rome, subsidies distorted bread prices. In India, gold was hoarded in temples, reducing circulation. In Ming China, silver dominated, and gold's role fluctuated. In Turkey, dowry savings preserved gold's cultural role.
Staple foods varied: bread in Europe, rice in Asia, maize in the Americas. But across these, an ounce of gold consistently bought core calories.
Cultural practices also mattered. In India and Vietnam, jewelry served as savings. In Europe, coins circulated more. These differences show that the "constant" is not uniform but adapted to context.
⸻
10. The Lesson of the Golden Constant
The cumulative lesson of Jastram, Leyland, and Erb & Harvey is clear: gold preserves but does not compound.
It is insurance, not growth. An ounce has bought dignity in clothing and food for 2,000 years. But it does not multiply wealth like equities. Investors who bought gold in 1980 or 2011 learned this the hard way.
Central banks hold ~36,000 tonnes of gold not for yield but for survival. Families pass down jewelry not to enrich heirs but to ensure they are never destitute. This is the true golden constant: across empires and crises, gold guarantees continuity.
