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  • From: Clansgian AT wmconnect.com
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Yet More on Gold
  • Date: Fri, 2 Jan 2009 12:04:43 EST

The idea of gold being an eternal and stable storehouse of wealth, a line
that is most often heard on the infomercials offering to sell you gold, was
being
discussed amongst some acquaintances and the following I found a bit
interesting.

At one time, and for a long time, in our history, the definition of a dollar
was the monetary value of the goods and services for a family for more or
less
a couple of days. Thus the average wage, based on this definition, for a
very long time in our history was a dollar a day. That is, the definition of
a
dollar was naturally extrapolated from placing a cash value on what it took
in
rent, food, fuel, and other expenses for a typical family.

During that time a dollar a day was not the (de facto) minimum wage, it was
the wage for an AB trained worker in difficult and dangerous work. It was
the
wage paid to mine workers, loggers, boatmen, teamsters, etc.

My great grandmother worked as a cook in the logging camps just before the
turn of the previous century. She told how (and apparently this was a
universal
practice) the payroll was accomplished by going to the bank on payday and
getting sacks of silver dollars. When the men lined up for the pay roll, the
boss made sure they agreed how many days the man had worked and then counted
out
a stack of silver dollars for that many days. The main purpose of silver
dollars was for paying for labor in an efficient and easily recognized manner.

The "value" of silver in dollars was fixed by the government in order to
ensure a stable currency. In those days a 'day' was as long as the employer
said
it was and people typically worked six days a week. But I want to inject an
anachronism here and impose 21st century habits on my 19th century workforce
so
that I can make a valid comparison. Let's suppose you emplyed someone back
then five days a week, a typical month would mean you are going to pay them
for
twenty to twenty-two days. The 1889 Double Eagle I have would have, in 1889,
paid for the hard physical work for a trained or semi-skilled AB worker for a
month. The coin is of course, by definition, one troy ounce of gold since at
that time, and until the 1930's, the definition of a dollar was fixed at
1/20th an ounce of gold.

Let's suppose, as is the case, someone (my great grandfather in this case)
slipped a double eagle in his pocket in 1889 and it passed along three more
generations to get to me. Has it increased in value or at least kept its
1889
value?

In 1889 I could hire someone for more than 8 hours a day for twenty days with
that coin. Now if I paid the new 2009 minimum wage of $7.25 for an
abreviated (and less valuable) twenty days of only eight ours each, I would
have to pay
$1160 (even if I could do that without paying my contribution to SS on behalf
of this worker). Gold is now enjoying a somewhat elevated price at just
under $880. It might bubble, as Leslie suggests it might, but usually
goldniks
began to breath heavily and drool when gold approaches $1000. Still, just
hiring some minimum wage dolt to stand around would cost me more than that
ounce of
gold.

Ah, but in 1889, the dollar a day wasn't equivalent to the minimum wage, it
was an average wage for a capable trade worker. That amount today is closet
to
$20/hr. So to hire such a worker today would cost me at least $3200 for the
month.

This is not an observation that gold is more common or less "valuable" today,
it illustrates that gold had that value in 1889 because the government
enforced the definition of its value. Today, with gold being higher than it
has for
some years, it still does not have the "value" it had 120 years ago.

James



  • [Homestead] Yet More on Gold, Clansgian, 01/02/2009

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