What if I told you that house prices in Australia are the cheapest they’ve ever been if you measure the price in gold?

Stick with me because this matters. In 1970, the median Sydney house price was $18,700 and the gold price was about $34 per ounce, which means that a median Sydney house was worth 550 ounces of gold. Today, depending on whose figures you accept, a median Sydney house price, well, it’s about $1.5 million, which is nuts. But the current gold spot price is $5,190, meaning that $1.5 million worth of house can be bought for, drum roll please, $289 of gold, down from 550 ounces of gold in 1970. Which means that a median house in Sydney today is 47% cheaper than it was 55 years ago if you buy with gold instead of with Australian dollars.

So the question isn’t why are our houses so expensive. The question really is what happened to the value of our money. My name’s Topher Field. This is the Topher project and in today’s video we’re going to get right to the heart of the problem with the Australian economy. Our unaffordable property prices, our insane energy prices, and our crippling cost of living, and our nonviable cost of doing business. They look like different problems, but actually they’re all exactly the same problem. It’s our money, and it’s specifically what our government has done with our money.

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The simple fact is that our money has lost nearly all of its value. And that’s a hard concept to wrap your head around until you do something like what I’m doing in this video and use something else. Let’s say gold as the benchmark instead of using this fiat mythical stuff that we call money as the benchmark. Houses would be nearly half their old price instead of being nearly 80 times their old price. And it’s not just housing that works out like this either. In 1970, 1 ounce of gold would have bought about five full tanks of petrol. Today, that same ounce of gold will buy you about 40 full tanks of petrol. Eight times more petrol, the same amount of metal, eight times the petrol. And I could go on with groceries and electricity and everything else, and the particulars would be different each time, but the result is always, broadly speaking, exactly the same. That ounce of gold will buy you way more today than it did 55 years ago. And yet, at the exact same time, your dollars buy way less. How come?

Well, once upon a time, our money represented gold. So, gold and money were the same thing. We carried around notes in addition to coins because the notes were more convenient. But until 1929, Australians could convert their pounds and pence directly into gold. Not in the sense of walking into a gold dealer and buying gold at whatever the spot price is today. No, no. Rather in the sense that every Australian pound, yes, we had pounds and pence until 1966. But before the 1930s, every Australian pound was backed directly by a little over 7 g of gold, which was held in the Treasury. And if we were still on a gold standard today, then what’s happened with gold prices would also have happened with your dollar values and houses and petrol and food and electricity would all be cheaper than ever before.

Now, I am oversimplifying. It is of course more complicated than that because there’s still the question of wages.

And what really matters isn’t so much the value of these things relative to an ounce of gold, but rather it’s the value of these things relative to an hour of work that actually matters when it comes to quality of life for most of us. So, let me explicitly say that it’s not as simple as what I’m covering in this video. But this is a YouTube video and not an economics degree. Bite me. But even with the fact that I am simplifying and it is not as simple as if we’d stayed on the gold standard that our houses would be half price. It’s not that simple. But even with that in mind, surely you can see that if house prices have nearly halved in terms of their value in gold but have gone up 80 times in terms of their value in government issued currency, then something’s gone very wrong with the government issued currency.

The problem is that when we left the gold standard where every dollar was backed by just over uh seven grams of physical precious metals or every pound was rather, we didn’t switch to some other standard, some other metal or some other backing. We switched to nothing. Money today doesn’t represent any tangible asset, which means there’s no limit to how many dollars the government can create literally out of thin air. Now, to be fair, if a currency is well-managed, this approach can actually work. And it does actually have some advantages over a fully precious metals backed currency because it’s been argued that at times you need the money supply to increase or decrease. And fully backed currencies can’t really do that very quickly because whoever issues the currency needs to get the precious metals to back it up with before they can print more of that currency.

Now the way that limitation in the supply chain used to be solved back when our currency was backed by precious metals was and this is going to blow your mind that there used to be privately issued currencies privately issued money. There actually used to be competition in money and not just what we have today where there’s different currencies issued by different governments but actually even within Australia banks were issuing money. And actually if you really stop and think about it any of us can issue money because money in its simplest form is just an IOU. Back when the Australian pound was fully backed by gold, every single pound was an IOU for a bit over 7 grams of gold. And we could trade that amongst ourselves, but at any time any one of us could take our pound to the right place and we could redeem that for that gold. And for as long as we all had the confidence that that 7 grams of gold really did exist and that we really would be able to go and get it if we wanted it, then no one really bothered to go and get it. We just traded the notes amongst ourselves as if they were gold. And rarely would anyone actually go and get their actual physical gold.

But see, it doesn’t have to be gold that backs any currency. What if a supermarket issued money backed by sacks of rice and jars of honey? For as long as you have the confidence that that supermarket really does have all those sacks of rice and jars of honey and that they will hand them over to you if you want them. Well, why would you hand it over? Why not just use the money for our own purchases amongst ourselves using those IOUs as our means of exchange with the value of that means of exchange being set by the thing that it’s redeemable for. As soon as an IOU goes into circulation, well, if everyone has faith in it, it’s money. And that’s exactly what used to happen.

Money itself could sometimes be hard to come by, particularly in remote areas, cuz everything was done in cash back then.

They didn’t have computers and online money and precious metals and liquidity could become a genuine problem. So people would be able to do work for each other. They’re happy to provide value to each other, but they didn’t have a means of exchange cash to pay each other. And that’s one of the problems with a fully precious metals backed currency. It’s just not a problem if you also allow competition in currency.

So what would happen in remote locations is let’s say a general store might issue an IOU to someone who I don’t know repaired a broken window at the store or maybe the store owner buys a bicycle from a local for their kid and they pay that local in the form of an IOU. Hey, you can come into my store and redeem that for any goods of your choice. Done. Now, that window repairer or the dad who sold the bike, well, they might use that IOU in the store. Or they might use that IOU to buy something off someone else entirely because for as long as everyone involved has faith in the general store, that the general store will have the goods that they’re supposed to have and that they will honor the IOU. Well, at that point, no one really needs to walk in the door of the general store and redeem that for it to have value. It has value just out here as a means of exchange. In time, entire communities sometimes found themselves operating on their own unique currencies issued by the general store or by a local bank that has gold on deposit or whatever it may be.

Private currencies were once commonplace even in Australia and they provided a liquidity buffer where it was needed wherever the government-issued gold-backed currency was in short supply.

And that works. Private money works for as long as people have faith in it. Let’s take our general store example, but let’s fast forward by, let’s say, 10 years. Now, there’s a thriving town busy with industry, and these IOUs from the general store have been issued for all of those 10 years, and they’ve kind of become the standard currency in that particular town. But one day, someone sits down and does the math and realizes there’s so many IOUs in circulation that that general store could not possibly have anywhere near enough stock to actually honor all of those IOUs if people brought them back and tried to cash them in.

And then word begins to spread and people start to get worried. The general store doesn’t have enough to cover all of these IOUs. Maybe these IOUs aren’t worth as much as we thought they were. But because other currencies, alternative money is in short supply, well, they want to get out of these IOUs that they’re now worried about, and they want to buy these other currencies, these other types of money. So, they start to bid up the price of these other forms of currency because they no longer see full value in the IOUs that they’re holding. They’ve lost some of their confidence, their faith in that currency.

Now, all of a sudden, a bunch of worried locals stampede down to the general store to redeem their IOUs. They’re trying to get ahead of the coming collapse and they quickly strip the shelves of the general store completely bare, exchanging their IOUs for real goods at the last moment before the collapse and leaving anyone who was behind them empty-handed. In an instant, the remaining IOUs, once the backbone of that entire economy, have devalued to nothing. Anyone who was saving them up for a rainy day now has nothing but a wad of toilet paper. And that’s something we call hyperinflation. And in places like Zimbabwe, Venezuela, and in Germany under the Weimar Republic, money literally became so worthless that it was used by people as toilet paper.

And so money can be created and it can be destroyed. It can increase in value and it can lose value. And there is no government necessary in order for money to exist and be accepted as long as people have faith in it. So why do we have government-issued currencies at all? Well, it’s because governments like to have control. Control over money because money is the ultimate power over people. It’s the most fundamental building block of any economy and therefore of all of our economic lives.

Before 1910 here in Australia, we didn’t just have British pounds and pence circulating in Australia. We also had state currencies as well as private currencies. Then in 1909, the Australian Notes Act gave the government power to create a federal Australian currency. Now, at the same time, they banned the state currencies just to get the whole country operating under one federal currency. But they couldn’t legally ban private currencies. That’s not something that was within their authority to do. So instead of banning them, they passed the Bank Notes Tax Act of 1910, which imposed a 10% per annum tax on all non-government money, effectively ending the use of private currency in Australia once and for all.

Then in 1929, Australia left the gold standard for the last time, using the Great Depression as their excuse, and the devaluation of Australian money really began in earnest.

It wasn’t until five decades later in 1966 that Australia converted to a decimal currency, the dollars and cents that we know today. And six decades after that, our dollar created in 1966 has lost way more than 90% of its purchasing power, with $100 from 1966 being worth more than $1,300 today.

But why would dollars lose value like that? Well, remember the story about the general store and the people losing confidence in it because they realized that there were more IOUs issued than there were goods on the shelves. Well, again, I’m simplifying, but in essence, what a government is doing when it issues a currency with no backing, no precious metals and nothing on the shelves, so to speak, is it’s trading on its goodwill. It’s trading on its own ability to stay solvent, to tax its people. And in essence, it’s kind of, you can think of it as issuing little bits of us, all of our infrastructure, our economic activity, our resources, our future production. The value of all of that is bound up in the value in the confidence that people have in our currency.

And both domestically and internationally, we’re all kind of bidding on the value of our own dollar all the time. What we’re willing to buy and to sell Australian dollars for as compared to other currencies, but also what we’re willing to sell our time for in dollars, how many dollars we want for our expertise, for our skills, for our products, for our services. We’re all bidding on the value of the dollar all the time. It’s like when people were exchanging those IOUs from the general store. If people started to worry that they had issued too many of the IOUs, they would start to lose confidence in the IOUs they had and their value would drop. The same is true of Australian dollars or of any other currency for that matter.

And so what’s been happening over the decades is that our government has kept printing more and more dollars in essence creating more and more IOUs. And that’s not automatically a bad thing if there is more to back up those dollars with. You know, you can imagine people would have a lot more faith in the IOUs issued by a general store that’s the size of a Bunnings than they would have in IOUs issued by a general store that’s run out of the boot of someone’s car, right? The size matters. So, if the store gets bigger, if there’s more shelves and there’s more on the shelves, well, they can issue more IOUs and people will still have faith in the value of those IOUs.

But that’s not what’s been happening in Australia. The government has been printing more and more money, but the value of Australia hasn’t really been going up nearly fast enough to keep up people’s confidence. Now, again, I’m massively simplifying, but in principle and with allowances for other factors to have short-term impacts. These are the primary forces that are at work. How much money is in supply? What’s Australia really worth? And how much confidence do people have in our future? And those forces are the reason why our money has devalued so much.

Our infrastructure isn’t keeping up with the increase in money supply. Our GDP and productivity per person are down, not up. And yet, we’re deeper in debt than ever before, which is another way of saying there’s more dollars than ever before. We are issuing more IOUs, but the shelves are already half empty.

And this is the real reason why we see immigration at the levels that we see today. Because the government needs the overall GDP numbers to keep looking good or else global markets will lose even more faith in our economy and in our currency and inflation will happen. They know we’re in a per person recession. They know that productivity has no dived, that the cost of living is out of control, that quality of life is declining, that what’s left of our economy is completely uncompetitive on the global stage. They know all of that, but none of that matters to them. They have to keep pumping the GDP or else inflation is going to absolutely kick our asses as the international markets and the domestic users like you and I lose faith in the value of our own dollar.

This is what I mean when I say that the government is the cause of pretty much all of our economic problems. Money and the soundness of money, its ability to keep its value, is one of the most foundational elements of any economy. And if we don’t have sound money, it won’t be long before we don’t have anything at all. So, next time someone tells you that housing is unaffordable, agree with them because it’s true. If you’re buying in Australian dollars, sure, but also let them know that it’s not because the price of houses has gone up. In fact, if our currency was still backed by gold, then houses in Sydney would be half the price compared to the 1970s.

The problem is that the dollars we use to buy, sell, earn, and save, have lost nearly all of their value.

And given that we are still borrowing and printing money, adding more IOUs at a rate of about $200 million per day right now, and that we’re not using that money to build a more prosperous Australia, h I’d say that the value of our dollar is likely to keep going down for the foreseeable future.

Now, the fact that, oh, houses are cheaper if you buy them in gold, that’s pretty cold comfort to anyone who’s struggling. I recognize that. And a video like this might seem pretty hard-hearted. It might be frustrating or even aggravating because well, I’m telling you what the problem is, but I’m not really offering you much of a solution. Except that there are some things that you can do if you’re willing. None of them are a quick fix. We can’t turn this around in a hurry, but there are some things you can do to help protect yourself and your loved ones.

Because private currencies actually do still exist these days. The most well-known kind are called cryptocurrencies. And don’t worry, I’m not about to sell you something. I’m not working with any crypto exchanges and I’m not going to push you towards some shitcoin. I have nothing to sell you. Well, I mean, apart from my books and my DVDs and t-shirts and hoodies, but you get what I mean.

A word of warning on crypto, though. As with all private currencies of old, they’re only as good as what’s backing them and who’s running them. And in the case of most crypto, they’re backed by nothing and they’re run by idiots. Or even worse, they’re run by scammers in many cases. Now, technically, the same is actually true of fiat currencies like the Aussie dollar as well. It’s run by scammers, too, but that’s another story. At least something like the Australian dollar has popular acceptance on its side, which is more than can be said for most cryptos. So, please buyer beware. Don’t do anything stupid when it comes to crypto.

But with that in mind, let me share with you what I’m personally working towards. I don’t have any spare money at the moment. I know a lot of people don’t, and I’m no exception. But I do have a little bit of silver. It’s relatively affordable compared to gold. So, I plan to add to my teenytiny little silver collection as and when I can as time goes by. I also have a little teeny tiny bit of Bitcoin. And I mean a little teeny tiny bit of Bitcoin. But again, I plan to add to that as and when I can. If I had the money, I’d be buying gold as well. But at more than $5,000 an ounce right now, yeah, that’s well out of reach for me. And again, this isn’t advice. I’m not pretending that I know what you should do. You need to decide that based on your own circumstances, your own resources, and with the best advice that you can get.

I’m just sharing with you what I’m working towards myself because, well, I live and work and pay bills in Australia as well. So, you might be wondering, when will things get better here in Australia? Well, now that we understand the problem, you’ll see why I say that it’s not going to get better until the government stops trying to help us and instead gets out of our way. When they stop debasing the Australian dollar, racking up debt and wasting our wealth on welfare and consumption instead of on infrastructure and industry. And well, I had to break it to you, but that’s going to be a while.

Things actually have to get quite a lot worse before most of our fellow Australians are going to be hurting enough to be willing to look at trying something different. And whatever the future holds, things aren’t going to get better until we educate our fellow Australians to understand what’s really going on. And that means understanding what’s really going on with our money. And I reckon sharing this video so that they can understand that the house prices would be hived if we were still on the gold standard is a pretty good place to start them thinking.

My name is Topher Field. This is the Topher project and I help busy people like you to make sense of the nonsense that surrounds us and hopefully to be able to make better choices for yourself and your loved ones. And with videos like this, I’m hoping to put tools into your hands that you can use either by sharing this video or just information for conversations that you have so you can help your fellow Australians to get thinking about what the world could be like if we could get the government out of the way.

I am 100% viewer supported, so please support my work by buying me a coffee via the button at topherfield.net. And if this has been interesting and thought-provoking, then please check out my books, DVDs, and merch from goodpeoplebreakbadlaws.com.

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