A Constitutional Moment in History

This Corona virus episode is really disturbing on several fronts. I have tried to evoke one of them with this cartoon.

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Gold Has Retained Purchasing Power over the past 100 Years

As it happens, I am rereading the masters thesis of my economist father, Edward C. Harwood. He went on later to found the American Institute for Economic Research.

In his thesis, he cites the example of a car factory (this is 1931) that produces 100 cars a week. He gives the value at market of the weekly production at 100 pounds of gold.

In those days, the dollar was calibrated at $20.67 per ounce of gold. That puts the dollar value of the 100 cars at 100 pounds of gold x 16 ounces x $20.67 = $33,072, or $330.72 (in 1931) per vehicle.

Using today's dollar exchange rate with gold, we get the following:

100 x 16 x $1,713 = $2,740,800, which is $27,408 per vehicle.

The average price for a car in the US in 2019 is $36,718 according to Kelley Blue Book. I find that incredibly high, but according to a few articles I have read, this is indeed the average price of a light vehicle. One writer chocks the high price up to high demand and easy credit terms. This is possible, especially when you look at the demand for the bigger SUVs and light trucks.

But my fundamental point is that one can still buy a decent car for about 16 ounces of gold. Here's a 1929 Ford versus a 2020 Subaru.

By Richard Smith - Flickr, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=329429

2020 Subaru - same price!

I wish that we could still buy a car for 330.72 dollars! But you certainly can still buy a car for 16 ounces of gold.

Congress Sees No Limit to Its Credit

Last night Congress voted to pass another trillion dollar "stimulus" bill. Apparently, they believe the government has no credit limit.

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What Could Possibly Be Worse Than A Virus?

A few years ago, I ran a series of Unintended Consequences. One more comes to mind.

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