How Gold Solves the Housing Crisis

Affordability on housing has plummeted - since the excessive fiat currency printing - of the 2020 stimulus.

Between 2004 and 2024, the Australian national dwelling price-to-income ratio climbed rapidly from 6 to 8, a 33% increase. When priced in currency like AUD, housing is becoming increasingly unachievable for first-home buyers and young families.

While increasing the currency supply raises the cost of housing, the additional currency supply also finds its way into other hard assets such as gold. This means that holding gold over the long term allows one to keep pace with the affordability changes in housing, rather than being left behind, by holding the local currency. A simple strategy is to move with asset inflation, rather than be left behind by it.

Below we see the price of gold increase in direct relationship to the increase in currency supply of USD (M2)

As housing continues becoming unaffordable for those holding currency, the astute saver, holding gold – has in many cases, found housing become surprisingly cheaper - in the last 20 years. 

Below, we see that the price of US housing has increased 2.5x since 2006 when priced in USD. However, it has gotten 50% cheaper when priced in gold.

While there are phases where gold outperforms housing and vice versa – the chart below illustrates that over the long term - gold and housing move in tandem - increasing in dollar value together – amid the ever-increasing currency supply. 

The Shiller Case Home Price Index / Gold Ratio shown above further reinforces this view. We see that housing, priced in gold, is an oscillator within a sideways range - this is in stark contrast to the upward trend of housing when priced in dollars.

As many scratch their heads trying to solve the prevalent housing crisis with various socio-political reforms - a simple yet profound solution for the individual - is to simply hold hard assets like gold over the long term - to buy hard assets, like land (rather than holding the local currency, which cannot keep up).

Gold, along with being limited in supply and taking energy to produce - is also divisible, portable, uniform, and does not disintegrate – it therefore has the 6 essential properties of money. This is an important point of difference from fiat currency which has unlimited supply and takes no energy to produce, giving it no intrinsic value, and preventing it from being technically classed as money.

Gold is consistent, reliable and eternal, while the currencies around the world slowly pass away by a thousand cuts. As Voltaire aptly said, “Paper money eventually returns to its intrinsic value, zero”.

It is therefore fair to say that the housing crisis isn’t actually a crisis of housing, but rather a crisis of fiat debasement.

Unfortunately, the crisis of fiat debasement is rooted in government spending, debt, corruption and the need for popularity - fundamental to the very core of our financial and political system.

While an individual might not be able to change the core nature of our financial and political landscape, they could make decisions for their own finances, that empower them to not only overcome the perils of the current system of fiat debasement - but actively benefit from it over the long term.

Holding hard assets like gold and silver, which are limited in supply - priced in fiat, which is unlimited in supply - results in a consistent long-term increase of wealth - outpacing consumer inflation and keeping pace with asset inflation. This results in the ongoing inflation actively strengthening one's purchasing power, rather than weakening it.