Gasoline at 10 Cents a Gallon and Falling
by George Reisman
gasoline at 10 cents a gallon and falling sound impossible in todays
Well, if you
think its impossible, youre wrong. Because thats
where gasoline actually is, and it looks like its going even
its not 10 cents a gallon in todays paper money. But
it is 10 cents a gallon in the Constitutional money of the United
States, which is gold coin and bullion.
is now at $700 per ounce, and rising. To the right is a picture
of a $20 United States gold coin known as a Double Eagle. If you
look carefully, at the bottom of the coin, you can actually see
where it says Twenty Dollars.
This coin contains
approximately one ounce of actual gold, which means that at todays
market price of gold, its worth $700. And this means that
one gold dollar is worth $35 of todays paper dollars. And
that means that one gold dime is worth $3.50 in todays paper
money. This last, of course, is roughly what a gallon of gasoline
costs in todays paper money. Which means that a gallon of
gasoline costs just 10 gold cents.
So why does
a gallon of gasoline cost $3.50 in the paper money? Well, one explanation
is that were expressing the price of gasoline in terms of
a money that is itself very cheap and getting cheaper. Just think:
if $20 gold dollars are worth $700 paper dollars, one paper dollar
is worth only one thirty-fifth of a gold dollar. Thats less
than three cents. It shouldnt be surprising that buying things
with three-cent dollars is going to require a lot of such dollars.
key point here is that our money is getting cheaper and thats
why prices are rising. Dont be surprised if in the future,
gasoline is a lot more expensive in paper money than it is today
and, at the same time, cheaper than it is today in our Constitutional
gold money. Look for $5 per gallon gasoline in paper and seven cents
per gallon gasoline in gold. Thats a real possibility.
Reisman [send him mail]
is Pepperdine University Professor Emeritus of Economics at Pepperdine
University's Graziadio School of Business & Management in Los Angeles,
and is the author of Capitalism:
A Treatise on Economics. Visit
© 2006 George Reisman