At a recent dinner, I brought along a gold coin that was minted almost a century ago. Dated 1912, it was the Canadian answer to the U.S. Eagle. Like the Eagle, it has a face value of ten dollars and contains a half ounce of gold. I passed it around, and someone I knew began flipping it almost as if it were a skipping stone. She didn’t act like she was flipping almost a thousand dollars’ worth of gold in her hands.
Skip forward to 1967. In that year, the Royal Canadian Mint offered a specimen set of coins that commemorated Canada 100th anniversary. Since gold was never outlawed in Canada, and since it was a special year, the prestige sets contained a gold coin that was about the same size as that $10. Unlike the 1912 coin, the 1967 gold was not intended for general circulation – but it had a face value that permitted it to be used in trade. That face value was $20.
Despite that period being dominated by the dangerous gold-exchange standard and the flawed Bretton Woods standard, the face value for almost the same amount of gold only doubled in the fifty-five year interim.
Flash forward to today. If the Mint wanted to make a circulation coin of the same size for next year, it would have to slap on a face value of $1,000. $10 in 1912 turned into $20 in 1967, which has turned into $1000 for right now. The same amount of gold you could get for a ten-spot almost a hundred years ago, would take ten 100s now. That’s the difference that a pure fiat standard makes.