We demonstrate that the difference between the official annual rate of inflation and changes in the sterling/gold exchange rate over time is less than 2%, easily explained by government statisticians routinely underestimating it. Therefore, long-run changes in the gold price are a better measure of currency debasement, fully confirming its role as a safe haven. And what is true for sterling is also true for other currencies.
Gold has always been money
In 1750, you could order a cup of coffee in Jonathan’s coffee house, which was the forerunner of the London Stock Exchange. Jobbers and sundry speculators would gather to listen and gossip about the latest speculations and perhaps trade in shares and bonds. That cup of coffee would cost you a penny.
There were 240 pre-decimal pennies to a pound sterling, which following the Coinage Act of 1816 became tied to a gold sovereign coin. A gold sovereign today is worth about £775, valuing a 1750 penny at about £3.23. An Americano coffee in Starbucks is about £3.25, perhaps slightly more in central London. But it is not just coincidence that the price is remarkably similar over the span of 276 years.
We can find similar examples over longer timespans. 1,725 years ago, the Roman
