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Comment by ajross | Hacker News Reader

As a "measurement of value" they both suck. Gold is (extremely) volatile and currency inflates.

Well, you can't do much to correct for the speculation noise in gold. But maybe we can attack from the other side. Maybe we could record prices for various representative products in a giant data set somewhere and calculate and record, I dunno, a "price index" that normalizes the prices to a value that is stable over time.

I bet people would pay good money to look at a chart like that. Maybe we could find one.

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Unfortunately Goodhart's law has rendered official inflation measures borderline useless, as anyone who has been shopping for food for the last decade can tell you.

Taking your example in good faith: Gold is four times as expensive today as it was at this time in 2015. Has food seen a 4x increase? No, right? So gold is volatile on a level way beyond inflation. QED.

Are CPI measurements difficult? Sure. It takes a bunch of expert eggheads and a lot of shouting to come to consensus. Still better than trusting some kind of magical commodity market to tell you.

You don't even need to trust CPI alone when looking in history, where things have evened out a bit: we have historical short-term bond yield data, even the yield curve: people bidding on short periods with the safest debtor expecting changes in nominal value.

Not to suggest CPI is redundant, there's a reason why central bankers read it after all. For one, it's the most timely data they have. But it's impossible to nudge it year after year -- accumulative error -- without it become obviously decoupled from other data, including the long-term bond market data. It just so happens commodities are the wrong yardstick.

> Gold is four times as expensive today as it was at this time in 2015

easy to explain. Gold has a supply constraint. More demand causes prices to rise. When you have a currency following a heavy inflationary trend, people buy Gold, so the price of Gold goes up.

People buying gold speculatively as an inflation hedge is exactly the opposite of gold being a source of stable value, though. Gold is "inflating" far, far faster than currency (edit to clarify: far faster than currency-valued goods; gold "interpreted as" a currency is deflating catastrophically), you just pointed it out!

There are a shocking number of gold-happy nerds on this site who are going to be shocked and horrified the next time it crashes (which is has, and will again). The nonsense the largely-partisan smarter-than-thou media you're watching is feeding you is nonsense, and at some point you're going to discover that via great suffering.

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