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Hereditary sloth instructs me

Ricardo V. Lagos, gold, pork bellies and money supply

Seems like everyone is talking about gold these days, with most words written the most basic of two-dimensional analyses. However, S.Am Economist Ricardo V. Lago proves that to write an overview of gold and its price rise you don’t have to be uninspiring. In his blog El Nuevo Sol, Lagos wrote this post yesterday and included this neat little chart (all I’ve done is re-label it in English, the credit is fully that of Lago):


Now, we all know (or darn well should by now) that inflation is driven by monetary factors and not price factors. Most of us know that Global Money Supply has been rising fast, too. But to see it in a chart like this really rams it home (i.e. good job, Lago).

Then there was this post by Joe Weisenthal over at TBI. He decided to get all tongue-in-cheek, but by accident he offers up insight. Here’s one of the charts in the post, showing the ratio of gold to pork belly prices in the last 10 years:

His point (if there was one, as it’s a pretty puerile post) is that “pork prices have been killed in gold terms over the ten year period” even though they’ve stayed fairly regular in dollar terms. So if you think about this more then a couple of seconds (i.e. more than Joe did, obviously) you’ll see that a gap is growing and it’s growing quickly. There are the “haves” that own gold and therefore have more purchasing power for dollars, for pork bellies, for plastic knick-knacks from China, for whatever you like. Then there are the “have nots” who don’t own gold but haven’t really suffered that much because with their dollars they can buy the same amount of pork bellies as they could 10 years ago.

The bottom line is that the wealth gap is widening. So you have to decide with side of the widening gap you’d like to be on.

Yours, Otto (long gold since 2005)

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