Guest Post: When Priced In Gold, The US Economy Is At Depression-Era Levels

Tyler Durden's picture


Submitted by Simon Black of SovereignMan blog,

As we slide into the end of yet another year in which the nominal price of gold has posted a positive return, I thought it would be interesting to take a look back on history to get a better understanding of where we are today.

It’s obvious that, for many reasons, the size of the global economy is far greater than it was decades ago. We learn in any basic economics course that, over the long run, enhanced productivity and increased technology drive long-term production gains.

Certainly, an economy can produce more widgets if you’re a lean, mean, automated machine… as opposed to a blacksmith with a hammer and forge.

But there are other factors as well. Population growth. Accounting standards. And of course, the continued inflation of the currency. $1 today buys a whole lot less today than it did a century ago, so when comparing, it’s important to find a better standard of measurement.

There are a number of pricing yardsticks we could use... like the cost of a New York City cinema ticket (25 cents in 1935, $20 today). But it would be awkard to calculate GDP in terms of billions of cinema tickets.

Gold is a much more appropriate (though still imperfect) long-term standard of pricing, with its history as a store of value dating back to the ancients.

With this in mind, I collected the appropriate data on gold prices, population, and GDP in the United States since 1791 and plotted GDP per capita denominated in ounces of gold.


This measurement smooths out changes in economic growth due to currency inflation and changes in the population, making it much easier to compares apples to apples.

The results are rather startling. In its earliest days, US GDP per capita was a mere 2.6 ounces of gold per person per year. But this grew quickly, effectively doubling in the 20 year period from 1791 to 1811.

Most of the 19th century proved difficult for growth, as it took another seven decades (over three times as long) for GDP per capita to double again. This makes sense given that the 19th century was marked by several costly wars (War of 1812, Mexican War, Civil War, etc.)

An industrialized American economy began to take off in the 20th century; GDP doubled from 12.00 ounces of gold per capita in 1892 to 23.55 ounces of gold per capita in 1916. And by 1929, it had almost doubled again to 41.12 ounces of gold per capita.

We know what happened after that– years of depression and economic stagnation. The economy bottomed in 1934 at 14.93 ounces of gold per capita, and then it began a multi-decade rise, peaking at 139.05 ounces of gold per capita in… 1970. This was right before Nixon closed the gold window. And the economy never touched that level again. How interesting.

Since 1970, it’s been a series of peaks and troughs. The economy boomed during the 1990s, then ran out of steam quickly in the ensuring dot-com/housing/sovereign bust.

We have just ended the year at 28.40 ounces of gold per capita (based on trailing twelve month GDP data). This is an astoundingly low figure.

To put it in perspective, since the end of the Great Depression, US GDP per capita has only been under 30 ounces of gold two times– this year, and 1980. That’s it.

In fact, the post-war average for the US economy is 72.83 ounces of gold per capita, so the economy today is an amazing 61% off this historical average.

Right now, the largest economy in the world is producing as much as it did in 1931, almost at the peak of the Great Depression. And no matter what the talking heads and politicians say, the data show that the trend is getting worse. Today’s figure is worse than last year, which was worse the year before. This trend of economic contraction goes back to 2001.

Curiously, this time period also coincides with the greatest expansion of debt and the monetary base in history. Hmmm. Coincidence?

This is truly incredible. With all of our modern advances in technology and productivity, our criminal Ponzi scheme debt-based fiat monetary system is so destructive that it’s turned the clock back seven decades on the economy. Mind blowing. If this doesn’t scream “SYSTEM RESET”, I don’t know what will.

Please share this with your friends and loved ones. It’s time for a wakeup call.

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Mon, 12/31/2012 - 15:37 | 3110075 Ralph Spoilsport
Ralph Spoilsport's picture

SYSTEM RESET! (cough hack wheeze)

Mon, 12/31/2012 - 17:46 | 3110660 ball-and-chain
ball-and-chain's picture

No system reset is on the way.

The elites are enjoying the cream from Bernanke's man-tits.

We're the new Japan.

Money-printing, debt, and deflation.

Lions and tigers and bears, oh my.

Mon, 12/31/2012 - 19:35 | 3110969 SafelyGraze
SafelyGraze's picture

wow .. gdp per capita is 30 ozt of au

good thing there's all that rehypothecating and shorting and paper ounces

otherwise gdp per capita would be close to 0.3 ozt of au

like it was when we had continental currency

Mon, 12/31/2012 - 15:38 | 3110076 SheepDog-One
SheepDog-One's picture

Stop supporting the central banking machine, starve it, make it grind to a halt. Leave them there holding their precious stocks and bond 'assets', now totaly worthless.

Mon, 12/31/2012 - 15:39 | 3110081 q99x2
q99x2's picture

And there they are like dope addicts cutting up the powder to see who gets the most on New Years Eve.

Mon, 12/31/2012 - 15:41 | 3110082 jjsilver
jjsilver's picture


Is Paying Federal Income Tax Voluntary?  


Uncle Sam Doesn’t Want You to Know that Income Taxes May Be Voluntary for Most Americans!



Think about it people, it has to be voluntary, otherwise it would be involuntary servitude



Mon, 12/31/2012 - 15:54 | 3110133 Panafrican Funk...
Panafrican Funktron Robot's picture

"Think about it people, it has to be voluntary, otherwise it would be involuntary servitude"

Your error is in assuming we still reside in a constitutional republic.  

Mon, 12/31/2012 - 15:58 | 3110148 jjsilver
jjsilver's picture

You are clueless

Mon, 12/31/2012 - 16:16 | 3110232 Beam Me Up Scotty
Beam Me Up Scotty's picture

Stop paying your taxes.  You can jump up and down all you want about how right you are from your jail cell.

Or, stop working.  No income, no tax.  Simple.

Mon, 12/31/2012 - 17:55 | 3110696 jjsilver
jjsilver's picture

I see the education system has done well with you,shill

Mon, 12/31/2012 - 19:59 | 3111037 Bicycle Repairman
Bicycle Repairman's picture

Don't be a wise guy.  You pay your income taxes or you go to jail.  Regardless of anyone's interpretation of law or history.

Tue, 01/01/2013 - 06:11 | 3111733 WhiteNight123129
WhiteNight123129's picture

Or move to another continent (I did it twice in my life personally already.)

Mon, 12/31/2012 - 17:43 | 3110644 cranky-old-geezer
cranky-old-geezer's picture




If you have a social security number you have joined the "system" and must pay income tax. 

Mon, 12/31/2012 - 18:02 | 3110719 jjsilver
jjsilver's picture

They must all be shills, or

"There will be in the next generation or so a pharmacological method of making people love their servitude and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies so that people will in fact have their liberties taken away from them but will rather enjoy it ... [through] brainwashing enhanced by pharmacological methods."

-- Aldous Huxley, speech at the California Medical School in San Francisco, 1961

Mon, 12/31/2012 - 18:19 | 3110775 cynicalskeptic
cynicalskeptic's picture

so... where's my SOMA?

Tue, 01/01/2013 - 10:43 | 3111864 dynomutt
dynomutt's picture

What, your Prozac, Paxil, Luvox, and Zoloft aren't enough for you?!

Mon, 12/31/2012 - 16:32 | 3110308 SgtShaftoe
SgtShaftoe's picture

Stop paying taxes = men with guns will bring violence upon you.  So even being correct, you win a pyrric victory.  Might doesn't make right, but it will certainly keep you paying your taxes.  

Mon, 12/31/2012 - 17:57 | 3110703 jjsilver
jjsilver's picture

Where did you get that idea, TV, shill

Mon, 12/31/2012 - 17:46 | 3110661 Hugh_Jorgan
Hugh_Jorgan's picture

Sure it is indeed voluntary, you will find that this is the truth of the matter once you do your homework. However once you stop paying, your files will be placed in a completely different file cabinet than before by the Federal Government. If you're itching to be one of the charter members of your local DHS re-education camp in the future; go for it. And that is if your file doesn't get prosecuted under a dirty progressive judge in the mean time, that is how they have gotten many people. If you aren't allowed to present the pertenent evidence regarding the law and the tax code, you will be found guilty and you will go to jail. Ask Wesley Snipes how his non-payment plan is working out for him...

Mon, 12/31/2012 - 17:56 | 3110700 jjsilver
jjsilver's picture

Brainwashing complete, shill

Mon, 12/31/2012 - 23:35 | 3111472 BooMushroom
BooMushroom's picture

If 100 million people decided not to pay income tax, Ghandi-style non-violent resistance, yeah it would work. Otherwise, the IRS is happy to lock up a few hundred people per year for tax evasion.

Tue, 01/01/2013 - 00:55 | 3111566 quadcap
quadcap's picture

Fuck you, stupid shill.   Your link contains a page with no content except an ad for some e-book.   Go back to trolling the sheep, you're out of your league here.  Asswipe.

Tue, 01/01/2013 - 13:08 | 3112230 GoldenDragon
GoldenDragon's picture

Your reference specifically states that - although the tax may be voluntary in a historical and legal sense - you should continue filing all tax forms and pay all taxes currently required.  Otherwise it would be like telling the Mafia that they have no legal right to extract protection money from you (paraphrased from your source).  That ends with men with guns taking your property and possibily your liberty or life.

So, is YOUR source a brainwashed shill like everyone else here stating that simple fact?

Are you suggesting that because it's "voluntary" that we should stop filing and paying taxes?  Is that what you are doing and, if so, how is it going for you?  Please, instead of name calling, why not share your experience with this issue.  I am genuinely curious.

Your source also suggests changing this not through tax-protesting but politically.  Which, I support and I imagine most people on this site support.

Mon, 12/31/2012 - 15:39 | 3110083 Tsunami Wave
Tsunami Wave's picture

I suppose we were at our zenith in the late 1960s and around 2000.  What a sad fall we're going through now.

Mon, 12/31/2012 - 16:39 | 3110334 cynicalskeptic
cynicalskeptic's picture

Compared to the rest of the world, the US (and much of Europe) has had a standard of living far greater than it has worked for - we financed our standard of living with debt for the last 50 years.    The US has made a point of looting the rest of the world of materials for as low a price as possible and used their labor for the cheapest possible wages.  we really have 'expoloited' the rest of the world and the rest of the world has finally taken notice.   China willingly played the game as a way to industrialize cheaply - the West shipped factories to China in exchange for cheap labor saving them the expense of borrowing funds to build that infrastructure.  China put aexcess rural population to work in those factories and took the money they earned to build up their nation and buy  up mining and energy interests, farmland and real TANGIBLE values.

Reality is that we are headed back to a far lower standard of living - one more in tune with what we actually 'earn' and 'produce'.   The sad thing is that standard may be even lower than what our grand parents and great-grandparents had - you were lucky to own a hoise, had ONE car if you were luckyand far less in the way of appliances and possessions.  Hell, in the 60's we got new clothes once a year - had shoes and sneakers (and often those were passed down witht the clothes).  This was in a middle class family.  Haven't seen anything like that in the last few decades.


Mon, 12/31/2012 - 18:34 | 3110804 GoldMInerJoe
GoldMInerJoe's picture

Fucking Exactly!!




+10 to the 55th



Mon, 12/31/2012 - 23:40 | 3111476 BooMushroom
BooMushroom's picture

I imagine mass suicide of women in the USA if this were to happen.

I can think of several off the top of my head that would rather die than quit shopping.

Tue, 01/01/2013 - 09:43 | 3111814 Svendblaaskaeg
Svendblaaskaeg's picture

"...Reality is that we are headed back to a far lower standard of living..."

I stayed at that "lower standard" and saved the rest for my retirement, first in papers, now in PM's (thank you ZH)


Mon, 12/31/2012 - 15:41 | 3110090 JustObserving
JustObserving's picture

If Bernanke and other western central banksters were not constantly attacking gold and silver, the depression would be much deeper.

Mon, 12/31/2012 - 15:44 | 3110101 Quinvarius
Quinvarius's picture

It is going back to 2.5 ounces per capita.  The data is courrupted after 1913 by Fed paper gold that doesn't exist.  That ponzi is ending.

Mon, 12/31/2012 - 15:45 | 3110109 gimli
gimli's picture

Nothing could be finer than to be a gold or silver miner in the mor....or....or....ning

Mon, 12/31/2012 - 17:49 | 3110667 Jack Napier
Jack Napier's picture

Nothing could be sweeter than a broke manipulator in the moor or orning.

Mon, 12/31/2012 - 15:45 | 3110113 Cursive
Cursive's picture

I'm all for a system reset.  Not looking forward to the breaking of the eggs, though.

Mon, 12/31/2012 - 15:45 | 3110114 TheSilverJournal
TheSilverJournal's picture

...and GDP is an overstated measure of economic output, plus the bull run for gold is just starting seeing that the fiat counterterfeiting ponzi is just reaching it's final stage. All of this is thanks to the central planners siphoning off the world's wealth through counterfeiting ponzies. Go to school to learn economics and what you really learn is ponzinomics. Most can't even comprehend how much wealth was stolen through this ponzi scheme and how much better off humanity would be if that siphoned off wealth was put to work in a productive manner instead of being tossed inefficiently to those most influential to the central planners that have gained the power to redistribute that wealth.

Mon, 12/31/2012 - 15:45 | 3110115 Fuh Querada
Fuh Querada's picture

The effect would be even more pronounced if the true gold price for physical could be used rather than the ludicrous CRIMEX fix.

Mon, 12/31/2012 - 16:16 | 3110234 oddjob
oddjob's picture

The second top in GDP is fake anyway. Pushing paper back and forth is not GDP, its white collar welfare.

Mon, 12/31/2012 - 17:45 | 3110652 The Alsatian
The Alsatian's picture

Just a couple of observations and a question. Is the gold price based on an annual average or a fixed date in the year? In real terms the price of Au peaked in Jan 1980, so is this chart telling us a top is nearly here (especailly considering the downward manipulation of Au/Ag), or is it really different this time? It's amazing to see the clear creation of the third central bank in the chart as well. The good news seems to be that applying the "ruler" approach over the long term trend (i.e. real progress in productivity gains) we're due for a nice bounce once the Ponzi collapses.

Mon, 12/31/2012 - 18:37 | 3110810 GoldMInerJoe
GoldMInerJoe's picture


Mon, 12/31/2012 - 15:49 | 3110121 SheepDog-One
SheepDog-One's picture

+200 point pump day for the DOW, based on NOTHING at matter how much it falls 1 day it will be regained the next day or the day after that....these criminals are fucking intollerable.

Mon, 12/31/2012 - 15:49 | 3110122 Everybodys All ...
Everybodys All American's picture

I can tell you that the small business owners that I talk to would agree with that assessment. Couple that with the new tax burdens from the fiscal cliff and Obamacare in 2013 and most business owners are wondering how to simply stay open. I really don't see how we avoid a recession this year and I don't think it matters how much more Bernanke prints.

Mon, 12/31/2012 - 15:49 | 3110124 vegas
vegas's picture

Time for a wake-up call? That train has left the station, with the average Amerikan dumber than a bag of hammers. Chalky's re-election proves the only thing that matters is getting "entitled" stuff at somebody else's expense. Real GDP priced in gold will only get worse; until the world forces Amerika to financially collapse. Math doesn't lie; the only question is what month of what year SHTF.

Mon, 12/31/2012 - 15:50 | 3110126 forrestdweller
forrestdweller's picture

if i look at the graph, i can see that we almost hit the bottom. so soon, it will be up for many years to come.

happy happy joy joy!

Mon, 12/31/2012 - 16:45 | 3110371 shovelhead
shovelhead's picture


A really good PR campaign would convince you to pay extra for fecal flavoring.

Mon, 12/31/2012 - 15:56 | 3110138 Bastiat
Bastiat's picture

Silver can't even wait for the new year -- 2013 will be epic for silver.

Mon, 12/31/2012 - 22:01 | 3111271 jvetter713
jvetter713's picture

I sure hope so.

Mon, 12/31/2012 - 15:59 | 3110146 GMadScientist
GMadScientist's picture

The chart of median income in gold is much more relevant than a BS metric like GDP.

Mon, 12/31/2012 - 15:59 | 3110147 Kaiser Sousa
Kaiser Sousa's picture

For my ZH real money brethren who understand the connection 

freedom = physical Gold and Silver

fiat * debt based currency = Slavery


Mon, 12/31/2012 - 16:05 | 3110178 Manipuflation
Manipuflation's picture

Fight club?  It's getting to be about that time.  I want my blood back.  Hey govt:  Wanna talk about the cruel and nasty penalties for stealing my blood in the first place?  Note to govt:  YOU will be the one incurring the loss via some serious fines, fees and penalties.




Mon, 12/31/2012 - 16:23 | 3110252 DaveyJones
DaveyJones's picture

Then there's other annoying details about the real economy

(from The Oil Drum)


#8 - Oil will decline shortly after 2015, says former IEA oil expert

The Oil Drum staff wishes a Merry Christmas to all in our readership community. We are on a brief hiatus in this period, and will be back with our regular publications early in the new year. In the meantime, we present the top ten of best read Oil Drum posts in 2012. The third in this series is a January 2012 guest post by Matthieu Auzanneau, a freelance journalist living in Paris. This article previously appeared in Le Monde.

Olivier Rech developed petroleum scenarios for the International Energy Agency over a three year period, up until 2009. This French economist now advises large investment funds on behalf of La Française AM, a Parisian assets management firm. His forecasts for future petroleum production are now much more pessimistic than those published by the IEA. He expects stronger tensions as of 2013, and an inevitable overall decline of oil production "somewhere between 2015 and 2020", in the following interview.



Olivier Rech, responsible for petroleum issues at the International Energy Agency from 2006 to 2009.

Rech’s outlook serves as another significant contribution to the expanding list of leading sources portraying the threat of an imminent decline in global extraction of crude oil.

MA: What do you foresee? Let’s begin with the non-OPEC producers (which represent 58% of production and 23% of global reserves).

OR: Outside OPEC, things are clear: of 40 million barrels per day (mb/d) of conventional petroleum extracted from existing fields, we face an annual decline on the order of 1 to 2 mb/d.

MA: In your view, are we therefore close to the 5% decline per year from existing production mentioned by Royal Dutch Shell?

OR: Yes, that’s about it.

MA: And for OPEC production (42% of production and 77% of global reserves) ?

OR: It’s more difficult to say; the data are still opaque. We are stuck in a haze. Nevertheless, I note that Barclays and Goldman Sachs banks estimate that the spare production capacity of OPEC, more particularly that of Saudi Arabia, is significantly lower that what is officially claimed.

MA: Many new production projects are presently under development all around the world. What should we expect of them?

OR: There are new projects off the coasts of Brazil, Ghana and Guyana. The Gulf of Mexico is far from being depleted. The Arctic is far less certain, but there is real potential for natural gas there. Nevertheless, we must still expect a decade before seeing eventual and significant production of petroleum.

MA: In that case, what is your view on the timing of the global peak and decline of total world oil and alternative liquid fuels output?

OR: It is always delicate to project a precise date. The recovery rate of existing fields is increasing. The US on-shore production is declining very slowly (and one must add that they are drilling in a frenzy over there). It is an error to underestimate the know-how of drilling engineers.

MA: Taking account of all these factors capable of slowing a decline, what conclusion do you draw?

OR: We will certainly remain below 95 mb/d for the combined totals of conventional and non-conventional oil.

MA: Therefore, you are clearly more alarmist than the IEA and Total, the most pessimistic of petroleum companies. Total evokes the possibility of maintaining production on a plateau of about 95 mb/d until 2030.

OR: It's true. The production of oil has already been on a plateau since 2005 at around 82 mb/d. [NB: with biofuels and coal-to-liquid, we approximate 88 mb/d for all liquid fuels.] It appears to me impossible to go much higher. Since demand is still on an increasing trajectory (unless, possibly, the economic crisis engulfs the emerging economies), I expect to see the first tensions arising between 2013 and 2015.

MA: And after that?

OR: Afterwards, in my view, we will have to face a decline of the production of all forms of liquid fuels somewhere between 2015 to 2020. This decline will not necessarily be rapid, however, but it will be a decline, that much seems clear.

MA: You state “not necessarily rapid”. Why?

OR: This will all depend on the speed at which streams of non-conventional oil will be able to be developed. Conversion of coal and natural gas to liquid fuels will remain infinitesimal. For first-generation biofuels, I believe we are already approaching the maximal limit. As for second-generation biofuels, we are still at the stage of industrial pilot projects. It should take another quarter century before we achieve a significant production on a world scale, let’s say around 2.4 mb/d.

MA: In your view, will all of this be insufficient to compensate for the decline of existing conventional oil fields?

OR: Insufficient, yes.

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