[choros12]

Great article. Would like to point out an interesting fact though. $50 in 1951 was worth 1.5 ounces of gold. The article claims that currently collectors pay 100 times more for it in USD terms, aka 5,000usd. Which is 2.5 ounces of gold. In other words in the real value the set appreciated about 75% even though 100 times in nominal terms.

In the same timeframe price of oil in gold stayed the same for that example. Even though it is also 100 times more in USD terms.

[jackpirate]

Sorry, but you're wrong. 50 dollars in 1950 would be worth $447.81 in 2010, roughly ten times moer. The dolar value of the toy increased roughly 100 times. Therefore, the true value of the toy increased 100/10 = 10 times. The price of gold is irrelevant. All you showed is that gold would have been a better investment.

[choros12]

I'm sorry, but I have to disagree with you. Calling gold an investment is akin to calling USD or Swiss Franc an investment. It might be but its first and most important function is this of money. Think store of value and not profit.

Currently, an ounce of gold buys you a nice suit in New York. Two hundred years ago 1 ounce of gold was enough to buy a nice suit in London. And 2,000 years ago 1 ounce of gold was enough to buy a nice toga in Rome.

Price of oil in gold fluctuates around 15 barrels per ounce since World War 2.

The list continues... the point is that gold is an excellent store of value reflecting real prices increases much more accurately than government figures (a.k.a. CPI).

Gold is money. Historically, gold has been the best indicator and instrument to gauge inflation. The CPI numbers from Government don't even come close.

At the end it all really boils down to: is the Government provided CPI number or gold better instrument to gauge inflation?

My take is that if something has worked great to gauge inflation for the last 5,000 years then it probably still measures it pretty well.

The CPI number from Government that has vested interest in underreporting inflation? (because of debt). Thank you, buy I firmly believe that is has been grossly understated for for the last 60 years, ergo my numbers probably illustrate the real increase in value of the set better.

[cjy]

But gold isn't the only store of value. You could have used silver or copper. And, the value of gold fluctuates wildly in response to fears of future inflation. This creates a lot of noise. Finally, you should know that most economists consider the CPI to overstate inflation due to substitution bias: http://www.frbsf.org/econrsrch/wklyltr/el97-16.html

[count]

Gold isn't money, and it's not a store of value, any more than any other tangible asset is.

I don't know ANY STORE ANYWHERE that takes gold as payment. That means it's not money. You can pawn it or sell it, which exchanges gold for actual money, which you can then use as payment.