The Utter Meaninglessness of 'Record High Gold'

There is only one good reason to buy gold, and that is fear that your currency will lose most of its value. So the news that gold prices are soaring is ostensibly evidence that the dollar is due to crash eventually. (For more, see Michael Kinsley's Atlantic essay "My Inflation Nightmare.")

The price of gold, you might have heard on the news, reached a high this week. But this is a meaningless statistic. You shouldn't say "gold reached a record high this week" for the same reason nobody says "celery reached a record high this week," and for the same reason people bristle at the phrase "Avatar's record blockbuster numbers" or "2010's record deficit." The folks making the claims are not adjusting for inflation. Adjusted for inflation, we had higher deficits in the 1940s, "Gone With the Wind" made twice as much as "Avatar" in domestic grosses, and as for celery, I simply don't know.

The point is, gold is cheaper today than it was 30 years ago. David Leonhardt writes:

More than a month ago, Ryan Chittum of Columbia Journalism Review noticed the epidemic of alleged gold records and urged those of us in the media to stop. The actual record was set 30 years ago, when the price of gold, in today's dollars, hit $2,318 -- or 65 percent higher than it closed on Monday.

This isn't simply a question of math. Anyone who says gold is at a record high (or who said oil was several years ago) is getting the story wrong. Why? Because $10 today is not more valuable than $9 a few decades ago. Claiming otherwise is tantamount to saying that 10 rupees is more valuable than $9 because 10 is a bigger number than 9.

Read the full story at New York Times.