Bullion Vault – Licence CC BY-ND 2.0
We often scoff at supposedly how cheap things cost in decades gone by. For example, my wife and I recently watched a stage play of Jean Shepherd’s A Christmas Story, set in 1940’s America. (The lead character, Ralphie, wanted a Daisy Red Ryder Air Rifle, but all the adults warned him that he would “Shoot Your Eye Out”.) In the stage play Ralphie’s dad complains to the mother that he had to buy a new car battery at the outrageous price of six dollars. This low price got a big laugh, as was intended. A quick internet search found that a DieHard battery costs around $160 or about twenty-seven times as much. But was that 1940’s car battery really so cheap?
One way to compare prices of similar commodities and services over long periods of time is to convert the nominal prices to ounces of gold. As Alasdair Macleod of MacleodFinance.com keeps reminding us, gold is real money. The price of gold established at the Bretton Woods Conference in 1944 for settlement of international central bank trade accounts was $35 per ounce. So that six dollar battery cost .17 of an ounce of gold ($6/$35). Today that $160 DieHard would cost .035 of an ounce of gold at today’s gold price of $4,518 per ounce ($160/$4,518). That means that in 1940’s America Ralphie’s dad paid almost five times as much for what surely was a lower quality battery (.17/.035). Had America stayed on the $35 per ounce gold standard, that undoubtedly inferior six dollar batter would cost only $1.23 today ($6/4.86), which is a true indication of economic progress.
From 1944 to end of 2025 gold has gone up in dollar terms by 129 times ($4,518/$35). The price of that battery has gone up only twenty-seven times ($160/$6). There is a disconnect between the rising price of gold in dollar terms and the rising price of that battery, with the battery price rising much less than the gold price in dollar terms. It is impossible to know how much of this disconnect is related to more efficient battery production or simply the Cantillon Effect that new money enters the economy at certain points and filters its way through the economy causing higher nominal prices over time. We should have no illusions that the dollar price of gold will stabilize near the current level. Since fiat money expansion shows no sign of slowing, we should assume that the price of gold will continue to rise, dragging all dollar prices of fungible goods with it. Government and central bank authorities are flirting with an Austrian School “crack up boom” in which the currency is debased to worthlessness.
© Patrick Barron 2025 Website
