American Craftsmanship - American Gold - American Solutions
I stopped by to see the folks yesterday, and Mom was serving cake with a stainless steel cake server I remembered seeing as a child. She said she purchased it in the 1960s before I was born when asked about it. American-made stainless steel; still shiny and functional after nearly 60 years.
When this utensil was manufactured here in the United States, most of our coins were made of silver, and the US Dollar was considered as "good as gold" at an exchange rate of $35 per ounce. We had tons of manufacturing here in the United States, and the minimum wage was $1.25/hour. The silver in the five quarters ($1.25) that represented an hour of labor would be worth $28 today - nearly double the desired $15/hour minimum wage being talked about by politicians. What happened?
What Happened to Our Money?
In short, most of the silver was removed from our coins, and the US Dollar was decoupled from gold in 1971 as a result to Nixon shock. We can talk frequently and long about the Russia-Ukraine conflict and how that is causing major problems today. But most of the problems we are experiencing could be solved with sound money (gold and silver), and a resurrected American manufacturing base. A review of the old prices for everyday expenses here in the United States priced in silver or gold, compared to the new prices for the same items, helps to illustrate this point. We will also take a peek at prices worldwide, compare life in a debt-based system vs. a gold-backed system, and discuss how we can all create our gold-backed system regardless of what economic policies are in effect by our elected officials.
When Mom's cake server was manufactured in 1963, oil was $2.97 per barrel, and you could buy gasoline for $0.25 per gallon. A gallon of fuel for a silver quarter. Even at today's elevated fuel prices, a silver quarter ($5.60) will more than pay for more than a gallon of fuel. But it would take about 16 of today's non-silver quarters to purchase that same gallon of fuel. Back then, an ounce of gold ($35) would purchase nearly 12 barrels of oil. $35 today might fill your motorcycle with fuel, but not your car. At today's price of $115 per barrel, it would take $1,380 to purchase the 12 barrels of oil you got in 1963 for $35.00. But an ounce of gold today would purchase over 17 barrels of oil. Oil is still oil, silver is still silver, and gold is still gold; they haven't changed. But the dollars and cents of yesteryear are not the same as the dollars and cents of today.
What's Up With Oil?
Energy is the lifeblood of the world's economy, including here in the United States. And while discussions of alternative sources of energy such as wind and solar are growing in popularity, old energy sources such as oil, gas, and coal continue to supply most of the heat, electricity, and transportation needs here and elsewhere. Many believe that we could free ourselves from high gasoline prices by focusing on our oil production and stop depending on other nations like Russia to supply us with oil. But there is a reason why we import oil, including when we were the most significant oil exporter a few years ago, during record shale oil extraction here in the United States. Much of that shale oil is too light to be processed by our refineries and must be mixed with a heavier crude oil to create the correct consistency.
Heavy crude oil comes from Venezuela, Canada, Iran, and Russia. Because we had heavy sanctions and bans on oil shipments from Venezuela and Iran, we turned to Russian oil as a viable source in recent years. We imported record amounts of heavy oil from Russia in 2021, but this has become politically challenging since Russia invaded Ukraine last month. American envoys have recently been dispatched to both Iran and Venezuela, looking to perhaps reopen the oil trade with those nations to replace the US-Russia oil trade. But these negotiations are complicated and take time, especially with a divided Congress. There does not appear to be an immediate viable alternative, and sanctioning Russian oil imports may lead to $200/barrel oil in Europe and the United States.
The China Connection
Meanwhile, Russia claims it can sell its energy elsewhere, namely to China and other Eastern nations that are not privy to the Western sanctioning regime. Other sanctions involving credit cards from American companies such as Mastercard or Visa also appear to be ineffective and perhaps counter-productive. The financial networks and investments developed over many years in Russia are being abandoned to banks and credit cards from China that are stepping in to help keep money flowing in Russia while blocking the American companies out of future profits. Sometimes it is difficult to determine who is sanctioning whom, when the resulting pain is felt by both sides.
A couple of years ago, I remembered paying $1.89 per gallon for fuel. Today I paid $4.39. But interestingly, after the latest "sanctions on Russia", the average Russian is paying $1.82 per gallon after converting the per liter price into gallons, as discussed in this video. How can we in the sanctioning nation be paying more than those in the sanctioned nation? It might have to do with debt levels and gold levels. High debt and low gold is inflationary for an economy, whereas low debt and high gold help create economic stability. The US operates at a 130% debt to GDP ratio (high debt), while Russia is at an 18% debt to GDP ratio (low debt). The US has gold to GDP ratio of 0.58% (low gold), while Russia has 5.58% (high gold).
Putting Ourselves on a Gold Standard
Not surprisingly, those who have taken prudent steps to reduce debt, live more simply, and store a portion of our savings in precious metals, are not nearly as stressed out by the current inflationary environment as those who have not. Whether a nation, a city, a college endowment, a pension fund, or an individual, there are times when investment in physical gold is worth its weight in gold. All the time, actually - but now more than ever. Whether a 60-yr old American-made stainless steel cake server is still useful for serving cake or American gold or silver coins still useful for preserving purchasing power, perhaps it is time to start making things here in America again - and paying for them with sound money recognized as a store of value worldwide. Thankfully, if policymakers don't do it for us, we can do it for ourselves by owning gold and silver.