Gold and Silver's True Inflation-Adjusted Highs
Posted by Adam Sharp - Friday, March 25th, 2011
Most people will tell you that gold's inflation-adjusted high is around $2300. And that silver's is around $130.
But there is a glaring flaw with these targets. They use government inflation data. That means they understate real inflation. (primer on the CPI's flaws here).
Using data tracked by well-respected economist John Williams, of Shadowstats.com, shows that today, gold and silver still trade at a fraction of their real all-time highs today.
Gold - $7150
Bloomberg was one of the few mainstream outlets who covered this issue a few years back. Some may have missed it, so here is an excerpt:
Gold would need to rise more than sixfold to top the 1980 record, using a more accurate inflation-adjustment, said John Williams, an economist and the editor of Berkeley, California- based Shadowstats.com. He said the government has understated the cost of living over the past two decades with adjustments in the way it measures the basket of goods and services monitored by the U.S. consumer price index, or CPI.
Gold futures for December delivery closed Oct. 16 at $1,051.50 an ounce on the New York Mercantile Exchange’s Comex division, gaining for a third straight week.
"If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record," Williams said.
Silver - $402?
Mr. Williams on silver's true inflation-adjusted all-time high:
In like manner, the all-time high price for silver in January 1980 of $49.45 (London afternoon fix, per silver institute.org) has not been hit since, including in terms of inflation-adjusted dollars.
Based on inflation through March 2009, the 1980 silver price peak would be $135 per troy ounce, based on not-seasonally-adjusted-CPI-adjusted dollars, and would be $402 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.
Note: silver is a little trickier than gold, as the $49.45 high came amidst a scheme by the Hunt Brothers to corner the silver market. Nevertheless, we're talking about a price 12x higher than where we are now.
In short; gold and silver have plenty of room to run.
Especially when you factor in the unprecedented (and dangerous) measures being taken by the Fed. We have never, never, had interest rates this low for this long. And the U.S. is monetizing federal debt (printing money to fund govt, essentially).
Inflation-adjusted highs will also continue to go higher, assuming the dollar continues its slide.
That daily gold and silver price still as it is.......... Si Is it the meaning that still so big for running.... or how about the money values should be manage and the possibility to change the basic concept.... for more global stabilizing...money unit...
Real US Inflation Now Near 10%?Posted by Adam Sharp - Wednesday, April 13th, 2011
Last month we published an article titled, "MIT and ShadowStats Agree: Inflation Around 9%".
The MSM seems to be catching on, as CNBC's John Melloy just published a nice piece along the same lines.
Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.
Melloy does a good job pointing out the specific changes made to "official" inflation numbers, and how they mask real price increases:
Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.
Essentially, the Feds are making downward-adjustments to inflation based on improved manufacturing and productivity. That seems like a convoluted way to measure prices.
These "adjustments" are why we continue to rely on alternative inflation indices, such as those produced by John Williams of Shadowstats, and the MIT Billion Prices Project.
Here is the latest inflation chart by ShadowStats.com. The blue line shows Williams' alternate gauge, while the red line represents "official" inflation data:
MIT and ShadowStats Agree: Inflation Around 9%
Posted by Adam Sharp - Monday, March 7th, 2011
I've followed John Williams' Shadow Stats for years. When analyzing inflation-sensitive investments, I usually check his data first, then the traditional numbers. Here's one of their most recent charts (link).
The blue line shows Williams' alternative inflation rate at around 9%. That's based on the his index, which is like the old CPI calculation method. The official rate is red, and clocks in sub-2% today.
MIT inflation measure indicates near 9% annual U.S. inflation
MIT's Billion Prices Project tends to agree with Mr. Williams' data. This alternative inflation measure shows a roughly .75% inflation monthly (12 x .75% = 9% annually). If the trend continues, Americans could be looking at near 10% annual price spikes.
Don't expect official numbers to start showing uncomfortably-high inflation any time soon. But it'll be there. At the pump, at the store.
A week ago I paid $7.85 for a large popcorn at the movie theater. It wasn't even one of those buckets, which appear to have been phased out. Just a fairly large bag of popcorn. On top of $10.75 tickets.
Congressman Ron Paul talked inflation with Freedom Watch last week (clip below). He said consumer inflation in America may already be 9%, and cited ShadowStats.com as the source.
One of the other points Rep. Paul makes is important. Why is the Fed's "ideal" inflation range 2-3%? It's the most people will accept. Nations who begin monetizing their debt (as America started doing last year), are in desperate straits, having reached the limit of traditional interest-rate based policy.
In a growing, efficient economy, there's no reason why inflation has to happen. Prices would typically go down in periods where productivity improves, as companies improve efficiency.
Mainstream economists tell us deflation is always bad, and inflation is a good thing. But consider the argument put forth by Matthew Lynn, who said that deflation is a "lemon we all have been sold". Food for thought.