Posted on 10/16/2009 7:56:00 AM PDT by h20skier66
"A dollar is worth only 70¢ now," my Dad jabbered as we worked in the backyard. "And they say it'll only be worth 50¢ in a few years."
It was the mid-‘70s. I was helping my Dad build a dirt road to our barn and he wasn't happy. Not about the hard work or humidity, but from what was happening to the dollar. Inflation was starting to kick into high gear, grabbing headlines that even a girl-chasing teenager could understand.
I remember being appalled by the thought of going to the store and having the clerk demand $1.30 for an item marked $1. Knowing what I know now, my thinking wasn't that far off.
When Roosevelt issued his infamous 1933 presidential diktat, forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation, gold was $20.67/oz. In January 1934, the price was raised to $35/oz and the U.S. government pocketed the difference - and essentially devalued the dollar by 69%.
Today, the amount of bubble gum you get for $1 could have been purchased for 18¢ in 1971.
In sharp contrast, you can buy about 3½ times more bubble gum today with the same gold coin you had in 1971.
So where is the money to pay for all this going to come from? The government has only three choices to meet these liabilities:
1. Raise taxes 2. Cut spending 3. Allow inflation to rise from money printing, diluting the debt burden
(Excerpt) Read more at commoditynewscenter.com ...
I also make more than I did in 1970. Over 500% more, in fact.
People who worked in 1971 and saved a portion of their earnings for retirement have seen the value of their savings decrease. While the government borrowed money in 1971 and can pay it back at the rate of $.18 per dollar owed minus a small, and I do mean small rate of interest.
A person who could have been self-sufficient living on his savings will now have to live off government programs.
There are not a lot of solutions to this problem except you have to have your savings in something besides money, especially dollars. In the near future inflation will skyrocket. Mr. Obama has decided to print more money than we can possibly create through the normal banking system. Instead of having a 3% rate of inflation it will be more on the order of 20% or 25%.
One way to prosper in that kind of inflation is to purchase real estate. Put the smallest amount down possible and get the longest terms possible. Then you can be paying off with dollars that are worth much less than when you got them. The house you purchase will produce income in the form of rent, rent that can be raised with the rate of inflation so that you can make more in rent than the cost of the payments and upkeep. Eventually the house (or any commercial property for that matter) will be paid for and it's value will reflect the increase in prices due to inflation.
Keeping precious metals will protect you but not to the extent of commercial property.
While the stock market will sound bad because of what it has done in the last couple of years, it will be much better than money because its value will increase with inflation.
If you have money in savings now would be a good time to take it out. Once the high inflation rates hit the low interest loans will be a thing of the past.
Good luck old timers.
People who worked in 1971 and saved a portion of their earnings for retirement have seen the value of their savings decrease. While the government borrowed money in 1971 and can pay it back at the rate of $.18 per dollar owed minus a small, and I do mean small rate of interest.
A person who could have been self-sufficient living on his savings will now have to live off government programs.
There are not a lot of solutions to this problem except you have to have your savings in something besides money, especially dollars. In the near future inflation will skyrocket. Mr. Obama has decided to print more money than we can possibly create through the normal banking system. Instead of having a 3% rate of inflation it will be more on the order of 20% or 25%.
One way to prosper in that kind of inflation is to purchase real estate. Put the smallest amount down possible and get the longest terms possible. Then you can be paying off with dollars that are worth much less than when you got them. The house you purchase will produce income in the form of rent, rent that can be raised with the rate of inflation so that you can make more in rent than the cost of the payments and upkeep. Eventually the house (or any commercial property for that matter) will be paid for and it's value will reflect the increase in prices due to inflation.
Keeping precious metals will protect you but not to the extent of commercial property.
While the stock market will sound bad because of what it has done in the last couple of years, it will be much better than money because its value will increase with inflation.
If you have money in savings now would be a good time to take it out. Once the high inflation rates hit the low interest loans will be a thing of the past.
Good luck old timers.
People who worked in 1971 and saved a portion of their earnings for retirement have seen the value of their savings decrease. While the government borrowed money in 1971 and can pay it back at the rate of $.18 per dollar owed minus a small, and I do mean small rate of interest.
A person who could have been self-sufficient living on his savings will now have to live off government programs.
There are not a lot of solutions to this problem except you have to have your savings in something besides money, especially dollars. In the near future inflation will skyrocket. Mr. Obama has decided to print more money than we can possibly create through the normal banking system. Instead of having a 3% rate of inflation it will be more on the order of 20% or 25%.
One way to prosper in that kind of inflation is to purchase real estate. Put the smallest amount down possible and get the longest terms possible. Then you can be paying off with dollars that are worth much less than when you got them. The house you purchase will produce income in the form of rent, rent that can be raised with the rate of inflation so that you can make more in rent than the cost of the payments and upkeep. Eventually the house (or any commercial property for that matter) will be paid for and it's value will reflect the increase in prices due to inflation.
Keeping precious metals will protect you but not to the extent of commercial property.
While the stock market will sound bad because of what it has done in the last couple of years, it will be much better than money because its value will increase with inflation.
If you have money in savings now would be a good time to take it out. Once the high inflation rates hit the low interest loans will be a thing of the past.
Good luck old timers.
People who worked in 1971 and saved a portion of their earnings for retirement have seen the value of their savings decrease. While the government borrowed money in 1971 and can pay it back at the rate of $.18 per dollar owed minus a small, and I do mean small rate of interest.
A person who could have been self-sufficient living on his savings will now have to live off government programs.
There are not a lot of solutions to this problem except you have to have your savings in something besides money, especially dollars. In the near future inflation will skyrocket. Mr. Obama has decided to print more money than we can possibly create through the normal banking system. Instead of having a 3% rate of inflation it will be more on the order of 20% or 25%.
One way to prosper in that kind of inflation is to purchase real estate. Put the smallest amount down possible and get the longest terms possible. Then you can be paying off with dollars that are worth much less than when you got them. The house you purchase will produce income in the form of rent, rent that can be raised with the rate of inflation so that you can make more in rent than the cost of the payments and upkeep. Eventually the house (or any commercial property for that matter) will be paid for and it's value will reflect the increase in prices due to inflation.
Keeping precious metals will protect you but not to the extent of commercial property.
While the stock market will sound bad because of what it has done in the last couple of years, it will be much better than money because its value will increase with inflation.
If you have money in savings now would be a good time to take it out. Once the high inflation rates hit the low interest loans will be a thing of the past.
Good luck old timers.
People who worked in 1971 and saved a portion of their earnings for retirement have seen the value of their savings decrease. While the government borrowed money in 1971 and can pay it back at the rate of $.18 per dollar owed minus a small, and I do mean small rate of interest.
A person who could have been self-sufficient living on his savings will now have to live off government programs.
There are not a lot of solutions to this problem except you have to have your savings in something besides money, especially dollars. In the near future inflation will skyrocket. Mr. Obama has decided to print more money than we can possibly create through the normal banking system. Instead of having a 3% rate of inflation it will be more on the order of 20% or 25%.
One way to prosper in that kind of inflation is to purchase real estate. Put the smallest amount down possible and get the longest terms possible. Then you can be paying off with dollars that are worth much less than when you got them. The house you purchase will produce income in the form of rent, rent that can be raised with the rate of inflation so that you can make more in rent than the cost of the payments and upkeep. Eventually the house (or any commercial property for that matter) will be paid for and it's value will reflect the increase in prices due to inflation.
Keeping precious metals will protect you but not to the extent of commercial property.
While the stock market will sound bad because of what it has done in the last couple of years, it will be much better than money because its value will increase with inflation.
If you have money in savings now would be a good time to take it out. Once the high inflation rates hit the low interest loans will be a thing of the past.
Good luck old timers.
That’s why I’m turning a lot of dollars into little round circular pieces of silver these days.
The key is, what is the ratio of a unit of work to a unit of stuff? I work fewer hours to make the payment on my 2006 Ford Five Hundred with power windows, stereo and a/c than I did to make the payment on my 1979 Ford Fairmont with no radio, crank windows and no a/c.
I work fewer hours to pay for a McDonald’s double cheeseburger today than I worked to pay for a regular hamburger back then.
And I work fewer hours to pay for a Pentium 4 computer today than I would have for a Texas Instruments 4-function calculator in 1973.
Of course I realize it. It's implicit in what I wrote. Peoples' mistake is to view the dollar as constant and think prices go up; it's not that prices rise, it's that dollar value falls. If you sit on dollars as your investment, the value of that investment _will_ decline. If you work for $X, then sit on that money for a long time before spending it, you'll find the hard way that it takes more dollars to buy something than it did when you earned that cash. Ergo per the thread's title, if you earned a dollar back then it's worth $0.18 today.
What you emphasize is that the main reason the dollar falls is that the government, having pegged their debts to dollars, can only address gross over-spending by printing more dollars to cheat their way out of obligations. So far inflation (to wit: dollar devaluation) has been limited as the feds have delayed printing dollars by printing IOUs they sell to other countries; at some point this will end (only so many IOUs can be sold before demands for payback exceed continued sales) and the presses cranked up to do what they had to do for decades and didn't, and must now make up for lost time by compressing what should have been long-term inflation in to extremely short-term.
The question then is: what to invest in? Precious metals are preferred because they're compact (now $1000/oz), easily confirmed (simple purity testing), fungible (gold is gold, silver is silver), stable (no degradation over time), pretty (emotionally attractive), and the rate of production, by coincidence, approximates the world's increase in wealth (units of precious metals per person pretty stable over time). Gold is preferred having the best balance of these points. Real estate is similar, just lacking the portability, but has improved demand (gradual) over time. Other investments (antiques, businesses, relationships) may perform better but require much more attention & maintenance.
Upshot:
- fiat/consent currencies lose value, but are extremely convenient for transactions
- precious metals are fabulously stable in value, but are unsuitable for rapid transactions
- real estate will go up in value as populations encroach, but exchange is slow and value growth is slow.
- other investments are just downright iffy.
Money is transient, it loses value as you retain it. Store your money in something with inherent stable or increasing value.
If you owned it in 1979, your purchasing power would have declined significantly with that same gold today.
No, I acknowledge the rest of the time it is definitely much better than cash based on that criteria.
I was just pointing out that that drop was ignored by the article.
By no means am I saying gold is bad.
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