A study on the POG in relation to the U.S. debt from 1940-present.
gecko109
Posts: 8,231 ✭
Not sure if this data is useful, but I decided to run the numbers anyway. I wanted to see if there is a definitive coorelation between the price of gold and the national debt across time. Here is what I have found:
The 1st number is the year. The 2nd number is the total U.S. debt. The 3rd number is the amount gold would have to be worth, per oz, to cover the entire debt. The 4th number is the actual price of gold. The last number is the % that the actual POG was relative to what it needed to be to cover the debt. I have assumed little to no change in the U.S. gold stockpile of a stated 8,000 tons, or roughly 262 million ounces.
1940......$42 bil......$160......$35......22%
1950......$257 bil....$981......$40......4%
1960......$286 bil....$1091....$37......3%
1970......$370 bil....$1412....$38......3%
1980......$907 bil....$3461....$615....18%
1990......$3.2 tril....$12,213..$424....3%
2000......$5.6 tril....$21,374..$272....1%
2010......$13.5 tril...$51,526...$1410...3%
And....
Today.....$14.8 tril...$56,488....$1865....3%
Conclusion:
For the majority of the time, the price of gold has settled at around 3% of what the actual price would be if it had to cover every penny of our national debt. Today, that number is also 3%. There have been some WILD fluctuations....as in 1980. Clearly a big losing year for thos who purchased gold. As you can see, that price was 6x what the normal level is. And those who bought in 1980 did in fact lose. But when we look at 2000.....gold was well undervalued. An oz being worth only 1% of what gold would be worth to cover our entire debt. Anyone who bought gold in 2000 did VERY well!
My conclusion is that gold today at $1865 is at its normal "fighting weight", and is not due for any major corrections. If 3% is actually a stable number indicitave of where gold normally settles, then by the time we have ammassed $20 trillion in debt, the price of gold should be somewhere around $2,300.
Im very interested in any comments about my research. I found it to be a fun activity.
The 1st number is the year. The 2nd number is the total U.S. debt. The 3rd number is the amount gold would have to be worth, per oz, to cover the entire debt. The 4th number is the actual price of gold. The last number is the % that the actual POG was relative to what it needed to be to cover the debt. I have assumed little to no change in the U.S. gold stockpile of a stated 8,000 tons, or roughly 262 million ounces.
1940......$42 bil......$160......$35......22%
1950......$257 bil....$981......$40......4%
1960......$286 bil....$1091....$37......3%
1970......$370 bil....$1412....$38......3%
1980......$907 bil....$3461....$615....18%
1990......$3.2 tril....$12,213..$424....3%
2000......$5.6 tril....$21,374..$272....1%
2010......$13.5 tril...$51,526...$1410...3%
And....
Today.....$14.8 tril...$56,488....$1865....3%
Conclusion:
For the majority of the time, the price of gold has settled at around 3% of what the actual price would be if it had to cover every penny of our national debt. Today, that number is also 3%. There have been some WILD fluctuations....as in 1980. Clearly a big losing year for thos who purchased gold. As you can see, that price was 6x what the normal level is. And those who bought in 1980 did in fact lose. But when we look at 2000.....gold was well undervalued. An oz being worth only 1% of what gold would be worth to cover our entire debt. Anyone who bought gold in 2000 did VERY well!
My conclusion is that gold today at $1865 is at its normal "fighting weight", and is not due for any major corrections. If 3% is actually a stable number indicitave of where gold normally settles, then by the time we have ammassed $20 trillion in debt, the price of gold should be somewhere around $2,300.
Im very interested in any comments about my research. I found it to be a fun activity.
0
Comments
Now do the math when you add up the value of all the other assets held by the public besides gold... all the houses, all the skyscrapers, all the factories, all the farms, all of all of the other commodities, all the businesses, all of the personal possessions, and everything else.
the result will surprise you, unless you think gold is the only element in the world that matters to anyone and everyone.
Liberty: Parent of Science & Industry
<< <i>Great.
Now do the math when you add up the value of all the other assets held by the public besides gold... all the houses, all the skyscrapers, all the factories, all the farms, all of all of the other commodities, all the businesses, all of the personal possessions, and everything else.
the result will surprise you, unless you think gold is the only element in the world that matters to anyone and everyone. >>
Considering the average family actually holds debt, and about 25-30% of all Americans are actually upside down on their homes.....that number might surprise you! Each person would have to have a net worth of $46,000 to just simply break even on our total national debt. Thats every single newborn to every single patient on their deathbed. Considering the average American makes about $32,000/yr, and has less than $1,000 in the bank at any given time.....coupled with the above mentioned facts.....I just dont think we are ahead like you do. In fact, 47,000,000 Americans right now.....thats 1 in every 7....dont even have enough money to eat without the government sending them "help" in the form of foodstamps. And you think the average net wealth of an American is $46,000???
If you are counting the average American's share of the national debt as if he personally owes it, you have to count his share of Yosemite and the Smithsonian as if he owns it, too.
Liberty: Parent of Science & Industry
<< <i>Yes.
If you are counting the average American's share of the national debt as if he personally owes it, you have to count his share of Yosemite and the Smithsonian as if he owns it, too. >>
I do not consider national land value as eligible when discussing debt to assets. Thats like me counting the value of my kidney when discussing a credit limit increase on the phone with Visa. Could I sell it for $25,000 if I really had/want to? Probably. So should I use it as part of my net worth equation? Most decidedly not.
And yes....each person living in America owns a share of the debt. Since debt gets paid by people, and that debt belongs to the people of this nation, then yes....we all have a share in it.
Maybe then we'd have price stability and a balanced budget and a sound economic policy instead of a collapsing $.
And yes....each person living in America owns a share of the debt. Since debt gets paid by people, and that debt belongs to the people of this nation, then yes....we all have a share in it.
Yes, but it is an undivided share
To illustrate, I own a condominium that I bought in 1993 (well, buying. Paid 133k, owe 49k, it's worth 300k, down from 450k) I used to live there but now we rent it out.
(great deal by the way.. positive cash flow, deductions and depreciation, potential upside)
Anyway, besides the unit, I also "own" 1/144th of the grounds, including two pools and spas, basketball and sand volleyball courts, greens and fountains, signs, trees, sidewalks, fences, pool house, etc etc. However, the ownership is UNDIVIDED, meaning I cant claim exclusive use to any 1/144th of it, nor can I be billed for the whole cost of any given repair, even to the outside of my particular building. The HOA fee covering water, gas, trash, maintenance, etc has gone up, actually doubled in the 18 years, but it's still a good deal in the big picture.
Anything I do to the inside my apartment, good or bad, is on me, but we pool our resources for the big ticket items like roofs (national defense) and the lawn (national parks)
Anyway, the point is that America has other assets besides gold, and the public debt is an undivided abstraction when taken out of context of the systems in which it operates
I like your analysis for what it is: pulling two individual metrics out of an abysmally complicated system and correlating them, it's a useful starting point
Liberty: Parent of Science & Industry
<< <i>I do not consider national land value as eligible when discussing debt to assets. Thats like me counting the value of my kidney when discussing a credit limit increase on the phone with Visa. Could I sell it for $25,000 if I really had/want to? Probably. So should I use it as part of my net worth equation? Most decidedly not.
And yes....each person living in America owns a share of the debt. Since debt gets paid by people, and that debt belongs to the people of this nation, then yes....we all have a share in it.
Yes, but it is an undivided share
To illustrate, I own a condominium that I bought in 1993 (well, buying. Paid 133k, owe 49k, it's worth 300k, down from 450k) I used to live there but now we rent it out.
(great deal by the way.. positive cash flow, deductions and depreciation, potential upside)
Anyway, besides the unit, I also "own" 1/144th of the grounds, including two pools and spas, basketball and sand volleyball courts, greens and fountains, signs, trees, sidewalks, fences, pool house, etc etc. However, the ownership is UNDIVIDED, meaning I cant claim exclusive use to any 1/144th of it, nor can I be billed for the whole cost of any given repair, even to the outside of my particular building. The HOA fee covering water, gas, trash, maintenance, etc has gone up, actually doubled in the 18 years, but it's still a good deal in the big picture.
Anything I do to the inside my apartment, good or bad, is on me, but we pool our resources for the big ticket items like roofs (national defense) and the lawn (national parks). >>
I like your analogy. So basically the taxes we pay are our "HOA fees". Now, what happens when a condo association falls way behind on payments to the pool guy, landscaper, the snow removal man, and now has a leaky roof to boot, and its time to pay up? Are not the actual condo owners themselves on the hook? That is exactly the place we are in now. The actual citizens are on the hook for the government debt. When the government contracts for a service, they take YOUR money to pay for it. Either through taxation or inflation, you are paying the tab....fully. I agree its not equally divisible, but we all have a share of it.
I have to drive to work, but during the day, I'll tell you the stories of "the new roof", "the structural repair builder's lawsuit", and "whether to heat the pools in the summer"
Liberty: Parent of Science & Industry
This particular gold boom is being fueled by fears of the U.S. government borrowing so much it can never be paid back... fair enough, that's a valid concern. But that's different than the concern in the 1970s, which was inflation -- rather than excessive government debt.
Yes, we all have a share of it, and yes our taxes our like the HOA fees. AND if someone is wealthy and owns 4 units, they pay 4 x HOA because they "own" an undivided 4/144 of the common ground (and 4 times the financial responsibility for the related problems that develop) and yes, they do "special assesments" for major upgrades that increase or maintan the value of the complex. But don't forget, in additon to the bills for the complex, they still own the assets, too
And note that the value of the condo complex or constituent units has no direct relationship to how much gold, or diamonds, or money, or anything else the individual owners may or may not own, and that's why I don't see why you relate the National Debt to the amount or price of Gold only, and not to the total government or country assets. Maybe my point is, we've incurred a lot of debt as a country, and undoubtedly wasted quite a bit of that money, but we've also built up the US assets quite a bit in the past 200 years and even in the past 20, so that they're a lot more valuable...
it's like if my condo complex association borrowed a couple million dollars and built a state of the art gym and clubhouse, with free drinks and massages, and raised the monthly HOA fee. It would be a lot better to live there, (and/or receive more rent from tennants) although more expensive and with increased debt maintenance (interest) costs. If an owner didn't like it, they can't choose not to pay (because the HOA would then have a claim on their unit) instead they have to either take the package deal, or sell their unit and move elsewhere.
Liberty: Parent of Science & Industry
Liberty: Parent of Science & Industry
<< <i>Yes. If you are counting the average American's share of the national debt as if he personally owes it, you have to count his share of Yosemite and the Smithsonian as if he owns it, too. >>
Good luck ever getting your share of that pie. But the govt is happy to strap us down with our share of the national debt, future entitlements, Fannie and Freddie, and bank-owned
otc derivatives. When you factor all that on top of the $14 TRILL national debt, it becomes a different picture. Our "share" of Yosemite and other nationally owned interests is the
privilege of being able to use the park but only after paying any entrance fee, etc. If the super-volcano under Yosemite ever blows, we will own that too.
We the people also "own" the 8,133 tons of gold....about 0.84 ounces per person. Not much chance of ever seeing that either. Just like with the big banks, the govt keeps the valuable
tangible assets as well as the profits. The people get the losses and the illiquid paper products that are valued at 100% of their issue price.The price of gold in the 1970's rose to a level
to balance our sovereign debt. It really had nothing to do with GDP unless the ratio of sovereign debt to GDP was constant. GDP is massaged with things like deflators and other spin
tactics. The sovereign debt is pretty straight forward. The difference this time vs 1980 is that the govt/TBTF banks acting as the govt own illiquid off-balance sheet items that dwarf our
posted debt. Those off-balance sheet items are a game changer and sort of make these gold calculations much more difficult. Recall that the FED paid between $15-$20 TRILL to get
through round one of the derivatives crisis. That eventually comes out of all our pockets. Essentially, we more than doubled the national debt again though on paper no change was
noted by the plank owners. This sleight of hand was accomplished w/o changing the posted national debt or the money supply aggregates. If you or I did that we'd be serving hard time
for fraud.
roadrunner