An interesting oddity of the current gold price and the sterling to dollar exchange rate.

[randomness]

Expressed in gold, the value of a British pound today (07 August 2011) is just about the value of a British penny during the period of the gold standard (1844-1914). Put another way, today's pound is 1/240th of the value in gold of a pound during the period of the gold standard.

There's no actual economic significance to this particular level of inflation. 240 to one is only interesting because it was the number of pence in a pound in the old pre-decimal British monetary system. But to me it's interesting trivia.

It's something like a stopped clock, but one where the time just passed noon.

In pictures:
When it was struck, this coin had the gold value that
this coin has today.

The exact calculation goes like this: a gold sovereign contains 0.2354 troy ounces of pure gold. There are 240 pre-decimal pence in a pound. So for a present-day pound to be worth what a penny was in 1914, the value of that gold standard pound must be 240 present-day pounds. For the gold value of a sovereign to equal £240 in current pounds, one troy ounce of gold must be valued at £1,019.54 (240/0.2354). With the pound at US$1.64145 (xe.com) that is equivalent to a dollar price for one troy ounce of $1,673.53 (1,019.54 x 1.64145).

Gold has recently cleared the $1675/oz. level (kitco.com), so the value of the gold standard pound has just exceeded £240. Both the price of gold and the exchange rate between US dollars and British pounds fluctuate.

Comments

[achinhibitor.livejournal.com]

Measuring a currency against gold is only interesting if the value of gold is somehow constant. But gold's value isn't constant. In the short run, it's thinly traded and has some large government actors. In the long run, assuming peoples' interest in gold remains constant, it will appreciate as the money supply must increase (to prevent deflation) but the amount of gold cannot.

You keep reading things I am not saying.

[r-ness.livejournal.com]

Measuring a currency against gold is only interesting if the value of gold is somehow constant.

Again, not so. (Perhaps it is not interesting to you, I'll grant that.) I am measuring the monetary unit's pegged value in 1914 to the value of gold today, expressed in that unit's current value. I am not talking about buying power, and I have consistently and explicitly not been doing so throughout this entire thread. In those terms, gold's value is the only thing that is constant: that gold sovereign's defined weight has not changed.

I understand very clearly what you are saying--btw, your deflator site is in dollars, not pounds, and pounds have depreciated quite a bit against dollars in the last century, so the number is incorrect expressed in pounds, but that is a side-note--but I don't think you understand why it's entirely irrelevant to my post.

What I am doing is not what you think I am doing. I have been very clear about what I am doing, and you keep talking about a different subject entirely throughout this entire comment thread.

Here's another, shorter way I could put it.

[r-ness.livejournal.com]

You have mistaken a coinage trivia thread for an economics thread.