Howard Katz Takes Alan Abelson To Task

Howard Katz claims last Monday's rout was caused by Alan Abelson saying unkind things about gold in his Barron's column of last week. Katz make this point that's worth remembering: contrasting two periods of American history and the fate of real wages in each.

First, consider 1866-1896. During this period the U.S. was on (or returning to) the gold standard, stocks were flat, the real wages of the average worker rose by 90% and foreigners poured into this country because the streets were (in a very real sense) paved with gold. Second, consider 1980-2010. During this period the U.S. issued trillions of paper dollars (yes, trillions). Stocks went to the moon. The real wages of the American worker fell (the only generation to be poorer than its fathers) and foreigners are denigrated as “illegals,” and used as an object of hate. In which period were Americans rich and in which are they poor?

With regard to gold as an investment, Katz says it's time to sit tight; he cites a well-known quote from Jesse Livermore to that end.


Regarding real wages: remember Henry Ford's famous five-dollar day? Back in the time when he offered it, 1914, five dollars meant a quarter of an ounce of gold. Back then, no income tax was paid on wages of that size. So, a worker in Ford's plant would have gotten a quarter of an ounce of gold tax-free for a day's hard work. At today's prices, that's more than $350 per day take-home. A six-day week meant 1.5 ounces of gold per week, or about $1,700 at today's prices.

$1,700 per week, take-home. At current tax rates, that would be around $3,000 per week gross. If no vacation time, $3,000 a week is $156,000 per year before taxes. For skilled labour, albeit with a six-day week and eight-hour day. Yes, the five dollars was for eight hours of work.

Sounds a lot more impressive than the nominal value, doesn't it?