We wouldn't care about the price of gold; we would instead want to know how much our gold could buy. The price of goods, commodities and services would all be valued in relation to gold and a "dollar" would simply be another word for a specified amount of gold.
Gold is always worth what it can buy. To ask what the price of gold is in terms of dollars is redundant under a gold standard. If a dollar were defined as, let's say 1/2000th of an ounce of gold, we would then need to know how much of any given commodity 1/2000th of an ounce, or a dollar of gold would buy. Under a gold standard that would be determined by the marketplace-as it was for centuries. Only under a dollar standard has the "price" of gold become an issue. Why? The dollar depreciates. Since we went off the gold standard the dollar has experienced an almost 100% devaluation. In 1913 an ounce of gold could be bought for $20.67, soon after it cost $35 for an ounce, and today an ounce of gold costs almost 2,000 dollars.
To understand the fallacy of having a price for gold, temporarily forget about the dollar and look at what commodities are worth in relation to other commodities. Unlike their relationship to paper money, the relationship of commodities to each other has stayed roughly the same over centuries.
Here is an example from my article Trillion Dollar Gold:
If people were allowed to accept gold and silver coins the world would look much different. For example, everyone is complaining about the high price of gas. A gallon of gas is actually cheap. What if I told you that a gallon of gas actually only costs about a dime? It does-a silver dime. At 35 dollars for an ounce for silver, one tenth of that, or one thin new dime is worth about $3.50 or about what the national average price of gas is.
Since abandoning the gold standard dollars have become synonymous with paper money. We rarely even think of money now as anything other than paper. That's why people talk about the "price" of gold. But for centuries before paper there was the silver doubloon and the twenty dollar gold piece-the cold hard cash of the realm.
"Hard" and "cold" were terms used to distinguish commodity money from "soft" paper money back when people still handled both. Many mistrusted paper promises and opted to be paid in specie only, money they could touch and feel. Paper sometimes circulated at a discount to specie due to war, bank failures, or general fiscal mistrust; the same is true today.
With commodities valued this way money remained stable for centuries, yet the paper dollar has fallen in value by 98% since its crowing. Isn't it ironic that we still cling to the dollar as our "standard?" We price everything using depreciating dollars, but if we removed the dollar we could return to a system where goods and services are valued by what it cost to purchase them with other goods. In actuality, commodity prices have remained relatively stable over our lifetime. So why do we continue to use the dollar?
Good question. Especially when we consider that gold's value is about the same today as it was a century ago. It'd take about the same amount of gold today to buy a bushel of corn or a barrel of oil as it would of have in 1800. And if we paid with silver at the pump we'd be paying about the same for gas now as any other time in our history. That is why the free market always chose a commodity to be money, not decreed government paper promises.
Isn't it time to reexamine the virtues of such a standard? Source
