Gold is money, everything else is credit

I have been very busy to post long articles as I used to, so I’ll probably just try to post short ones now with just charts and short comments.

Last Saturday Steve Saretsky asked if someone could create a chart of house prices against gold. I thought that would be interesting, so I put charts together quickly. Here they are.

Sources: House Price Index, Price of Gold in USD 1950-Jul2020 , Price of Gold in USD since Jul2020: , Exchange rate USD to CAD: Google Finance

Greater Vancouver House Price Index vs Gold

Greater Vancouver Seasonally Adjusted, aggregate. Normalized for 2005 values
Same chart as above, with the values in different axes

National House Price Index vs Gold

National HPI normalized in 2005 values in CAD vs Gold
Same chart as above, with CAD on the left axis, and ounces of gold in the right axis

Conclusions

In Vancouver, back in Jan 2005 you needed $386,200 for a house, or 754 ounces of gold. (100 ref point). In Feb 2021 you need $1,089,300 for a house, or 455 ounces of gold. Hence you need 2.82x the amount in CAD for the same house now than in 2005, but 0.6x the amount in gold.

Some people thought that the point of these charts was to show that investing in gold is better than in houses. That is not the point, the point is that the Canadian Dollar has depreciated with respect to gold, and houses have actually gone down when measured in ounces of gold.

As J.P Morgan once said:

May be an image of 1 person and text that says '"Gold is money. Everything else is credit. -J.P. Morgan, 1912'
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