Now Online: Jastram's Classic Study of Gold's Purchasing Power
I'll let Robert Landis and Reginald Howe tell the story:
The Golden Constant by Roy W. Jastram
- Thanks to the generosity of John Wiley & Sons, Inc., which has graciously granted the necessary copyright permissions, we are able to republish today in PDF format and post in the Library as a public service what many consider the leading empirical study of gold: Roy W. Jastram’s The Golden Constant originally published by Wiley in 1977 and now nearly impossible to find except in university or other large libraries.
- This seminal work rigorously analyzes the purchasing power of gold in England and the United States from 1560 to 1976, employing a meticulous methodology that:
- constructs unified series of the price of gold since 1560;
- constructs unified series representing the level of wholesale commodity prices in every year since 1560
- determines the statistical relationship between these two series in such a way as to measure the purchasing power of gold since 1560;
- analyzes the behavior of that purchasing power in periods of inflation and deflation; and
- assesses the extent to which gold served as a hedge during inflationary periods and a conservator of purchasing power during deflationary periods.
The Golden Constant demonstrates conclusively that gold holds its purchasing power remarkably well over time. It concludes that gold prices do not chase after commodities, but rather that commodity prices return to the index level of gold, over and over, and that gold provides an effective refuge in times of upheaval.
Comments (10)
Ohhh Henry
From page 40:
"European commerce was severely impeded by the sparse supply of gold and silver. Economic development had come almost to a standstill and the prospect for expansion was dim."
Is there an Austrian point of view on this? Was lack of new sources of gold a bane to commerce, or was it a boon because its supply was not subject to inflation? Did the influx of gold cause bubbles of over-investment in, say, further exploratory missions? The many failed attempts to discover the Northwest Passage spring to mind ...
Published: December 5, 2004 9:42 PM
Robert Blumen
The Austrian view, which I believe originated in the classical period before Austrian economics, is that any quantity of money is sufficient for money to serve as money. The purchasing power of money can adjust by changes in the general price level to accomodate any quantity of mony in relation to goods.
Economic development depends on savings and investment, which is distinct from money. To see this, note that savings can occur even in a non-monetary economy. Savings can occur when someone abstains from consuming a consumption good and transfers it to another producer.
There is a good discussion of this in Rothbard, Chapter 11 (http://mises.org/rothbard/mes.asp).
Published: December 6, 2004 8:06 AM
David Heinrich
I believe that Rothbard qualified the statement that "any quantity is optimum", nothing that a quantity too large or too small ruled out the use of something as money. If the quantity is too large, the value/weight will be too low (imagine having to pay for everything in its steel-value). If the quantity is too small, it is insufficient proper liquidity and trading. If there were only 1 atom of gold for every person on earth, for example, there would clearly not be enough gold to use as money (I doubt that 6-billion gold atoms would even be visible to the naked eye, though I don't care to do the calculations to figure out how many grams that'd be).
Published: December 6, 2004 9:08 AM
Mike
I always love the complaint "there was not enough money". That means the borrowers objected to the price the lenders requested for use of their wealth. Solution? We'll make our own money and lend it at proper rates! (Fed).
If gold got the point of not being divisible enough to use in everyday common transactions (such as platinum would be today), some other commodity (eg. silver) would arise to serve as a subunit. And by allowing the participants to decide that through experience (the market), we would eventually have a solution to the problem.
I believe this bears out historically in that (until government fixing of exchange rates) gold was used primarily for large volume, international transactions and silver for smaller, common transactions.
Published: December 8, 2004 8:25 AM
Jamie
I'm interested in the file, but the link doesn't work... ???
Published: December 9, 2004 3:16 PM
Ohhh Henry
The book seems to have been removed from the website. But I did find this 1981 speech by Jastram, which contains some of the key material from the book:
http://www.goldensextant.com/Resources%20PDF/JASTRAM%20THE%20GOLD%20STANDARD.pdf
The concluding paragraph of the speech is rather ironic.
Published: December 9, 2004 10:45 PM
John Smith
Could Robert Blumen please kindly explain what happened to the Roy W. Jastram Golden Constant pdf? What pressure was brought to bear by/on the publisher to bring about the removal of said pdf document? I think you owe us all a proper explanation. For those who make a mockery of "gold manipulation" you need look no further for evidence.
Conspiracy theory's? BAH! Conspiratorial practices
indeed. Keep the people ignorant of gold's behavior under inflation/deflation and the suckers will "invest" their monies in equities 'til the ugly monetary debasement "Bernanke helicopter money" end. Glug, glug, glug.
Published: June 2, 2005 7:11 PM
Lorem Ipsum
Where has this document gone? Is this a software bug or has it been removed intentionally? I would very much like to read it.
Published: February 29, 2008 9:33 AM
jeffrey
Had to remove. I'm so sorry.
Published: February 29, 2008 9:36 AM
pej
could please someone let us know why the link had to be removed? I am very interested in reading this book and it's unavailable at any bookstore or online store. This is very disappointing :-(
Published: June 4, 2008 4:50 PM