Thursday, March 15, 2012

Silver And Gold, Worth Repeating

 I wrote this blog a few months ago when gas was cheaper but it is still true, The numbers have been updated, goes to show why gas costs so much. 

A lot has been said about Silver and Gold as an investment, I look at more as a hedge against inflation. I don't think silver and gold have risen in "value" as much as the price has gone up. Let me explain, Lets say you are riding around in your 1950 pickup in the year 1957. You have your girl sitting next to you because there is no seat belt law yet and you are jamming to Buddy Holly on your AM radio. You get low on gas so you pull into the local "filling" station and all you have is a quarter in your pocket.

Gas is normally around 24 cents a gallon but with a gas war going on it is maybe 18 cents, so you give the attendant a quarter and get over a  gallon of gas. (enough to get you to her house)
The reason the gas was this price was because our money was backed by silver. The paper money was backed by silver and coins were made out of silver (90%) so when the oil company sold you gas they only charged this because your money was "worth something"




 In 1964 the government had the bright idea to take out money off the "gold standard" and make our money worth ah..............well it's worth this much because we say so. I'm from the government "trust me" (sound familiar)
So here we are in 2012 and, well you know what gas costs. If you drove into a gas station today and tried to buy any gas with a quarter they would kick you to the curb, call 911 and report you for driving while being an idiot (actually now that I think about it maybe that should be a law) Anyway the reason for this is because your quarter is not worth anything so to speak. It has very little value because it is only worth what the government says it is worth. Now lets suppose you go home and dig one of those old pre-64 (90% silver) quarters out of your sock drawer and trot down to the local coin shop today, they would give you about $5.80 for it and guess what you could still buy a little over a gallon of gas. The reason the quarter would fetch this price is because the dollars you would get are worth a lot less than 1964, not that the silver had gone up in "value" because remember it bought the same thing it did back in 1957.
  My strategy is to buy silver a little at a time so you get dollar cost averaging. I have heard it said that all through history an ounce of gold would buy a man a fine suit of clothes, and today that is still true, not a Wal-Mart suit but a fine Taylor shop outfit.
This is the way I look at it, that gallon of gas in 1957 is not "worth" any more than it is today it's just that the money we use is worth a lot less so it takes more to buy it.

12 comments:

  1. I aways find your posts very interesting and informative.

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    1. I like to get people to think. Inflation is really out dollars being worth less.

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  2. Dear friend....worth repeating!

    your friend,
    kymber

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  3. Oil really needs to be taken off the stock market.

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    1. At least it should be more of a regional market where our oil stays here.

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