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In an economy, gold is just one more good. Sure, we could use it as an inflation index. Or we could use gasoline, or new cars, or eggs, or any of a million ot

In an economy, gold is just one more good. Sure, we could use it as an inflation index. Or we could use gasoline, or new cars, or eggs, or any of a million other things. Why should we use gold as opposed to all those other things? Or, here's an idea, maybe we should use a weighted index of several of those things as a measure, in order to prevent misleading data from the fluctuations in the price of any one item?

vel0city 3y ago
Hey, that idea sounds really great. We could create some normalized basket of goods consumers normally buy. Then we could chart that basket as some kind of index of consumer prices. Nah. Who would do that. We can just look at the price of gold, that's all that really matters.
- nine_k 3y ago
  Peruse Purchasing Power Parity stats for that.
fatherzine 3y ago
Exactly. Use gasoline instead. See e.g https://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart https://www.macrotrends.net/1380/gold-to-oil-ratio-historica.... Over 80 years (since 1946), the ratio held stable within 10-40 range, with a few brief spikes. The variance from the average held in a band [-2x, 2x], with a few brief spikes of ~ +-4x. See also e.g. https://www.creditdonkey.com/gas-price-history.html https://www.creditdonkey.com/gas-price-history.html for the raw price of gasoline, exponentially shaped. The increase over 80 years (since 1946, to match the ratio dataset) is 15x. Extra wrinkle. The exponent of the exponential is not quite constant over time, currency can debase much faster than one would naively expect by extrapolating historical trends. Edit. For completness, the BLS inflation index tracks a price inflation from 1946 to 2023 of, guess what, 15x. https://www.in2013dollars.com/us/inflation/1946 https://www.in2013dollars.com/us/inflation/1946
RetroTechie 3y ago
> Or, here's an idea, maybe we should use a weighted index of several of those things as a measure That's done already. More useful: such index as a ratio of wages. Say, [price of standardized basket of commodities] / minimum wage. That would tell you how many # of paid work needed to (for example) fill a shopping cart with a week's worth of food + heating / powering one's home over that time. ("minimum wage" = applies to folks scraping by in low-paid jobs. Higher earners are living the good life anyway, imho).
- fatherzine 3y ago
  Excellent idea. minimum / median / x% quartiles.

vel0city 3y ago

Hey, that idea sounds really great. We could create some normalized basket of goods consumers normally buy. Then we could chart that basket as some kind of index of consumer prices. Nah. Who would do that. We can just look at the price of gold, that's all that really matters.

nine_k 3y ago
Peruse Purchasing Power Parity stats for that.

fatherzine 3y ago

Exactly. Use gasoline instead. See e.g https://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart https://www.macrotrends.net/1380/gold-to-oil-ratio-historica.... Over 80 years (since 1946), the ratio held stable within 10-40 range, with a few brief spikes. The variance from the average held in a band [-2x, 2x], with a few brief spikes of ~ +-4x. See also e.g. https://www.creditdonkey.com/gas-price-history.html https://www.creditdonkey.com/gas-price-history.html for the raw price of gasoline, exponentially shaped. The increase over 80 years (since 1946, to match the ratio dataset) is 15x. Extra wrinkle. The exponent of the exponential is not quite constant over time, currency can debase much faster than one would naively expect by extrapolating historical trends. Edit. For completness, the BLS inflation index tracks a price inflation from 1946 to 2023 of, guess what, 15x. https://www.in2013dollars.com/us/inflation/1946 https://www.in2013dollars.com/us/inflation/1946

RetroTechie 3y ago

> Or, here's an idea, maybe we should use a weighted index of several of those things as a measure That's done already. More useful: such index as a ratio of wages. Say, [price of standardized basket of commodities] / minimum wage. That would tell you how many # of paid work needed to (for example) fill a shopping cart with a week's worth of food + heating / powering one's home over that time. ("minimum wage" = applies to folks scraping by in low-paid jobs. Higher earners are living the good life anyway, imho).

fatherzine 3y ago
Excellent idea. minimum / median / x% quartiles.