It seems to me a fairer estimation of the worth of a stock market might be it’s relationship to gold rather than other measures such as PE ratios, what one generation is prepared to pay in terms of PE multiples for a market seems to change much more easily that the purchasing value of gold.
“WITH AN OUNCE OF GOLD a man could buy suit of clothes in the time of Shakespeare, in Beethoven and Jefferson, in the Depression of the 1930s,” according to one of the sources for our chart. That remained true in the 1980s, but it isn’t true in the late 1990s. The suit standard now implies a gold price of perhaps $1,000 per ounce. A really good man’s suit today can easily cost 4 ounces of gold – say, $1,250 at gold’s mid-April high for the year to date. And that’s without a vest, once standard.
Which is particularly interesting because the real gold price has been astoundingly stable since Shakespeare (born 1564). Even in the troubled 20th century, with inflation in the West on a scale unprecedented during the last 600 years (FORBES, Jan. 12, 1998), gold’s wild oscillations averaged at $612, very close to its $639 average for the tranquil 19th century. And comfortably within its historic range.
Interesting point: Gold will have to rise by about $300 just to get back to the $627 average of the last two centuries.
Edwin S. Rubenstein, written in 1998.
so, a decade later, a blip on the histroical timeline, gold seems to be finding its place in hsitory. a good suit of clothes can be had for 1k.
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