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OPINION
In 1700 years, as you can see in the chart above, not much has changed. Since 1971, when the United States detached the dollar from gold and ushered in the era of fiat money, the dollar has lost 84.5% of its purchasing power over the nearly fifty-year period. The 1971 dollar is now worth 15.5¢. Gold in the meanwhile has risen from $35/oz. then to roughly the $1600 level today (with a stop at $1900/oz in 2011.) Over the long run, gold in the modern era has maintained its purchasing power as it did in Roman times, while the dollar, like the denarius, has been steadily debased. So it is by the circuitous route just taken, you now know how Jack Whyte’s depiction of the Roman inflation in The Burning Stone reinforces the argument for gold ownership today, and why we went to the trouble of presenting a review of his book on this page.
We should not become desensitized to the prospects of future inflation as a result of the lull we have encountered in recent years. The loss of purchasing power goes on undeterred with some economists arguing now that it could accelerate in the near future. Even though price inflation is relatively subdued at present, monetary inflation continues unabated with consequences yet to be determined. In the inflationary process, it should be remembered that the line between cause and effect is not always a straight one. History teaches us that when inflation does arrive, it comes suddenly, without notice, and with a vengeance.
We hasten to add that at any point along the way in the Roman inflationary period, the hoarder who had stashed away earlier silver coinage would have effectively hedged the intermittent bouts of runaway inflation, as White’s story suggests. Though more volatile than gold, silver in the modern era has functioned effectively as a safe-haven asset in the portfolio. A chart like the one above could be drawn with silver as the overlay instead of gold.
– Michael J. Kosares
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