Friday, September 2, 2011

Silver and Gold, A different Prospective.

 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 2011 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 they would give you over $7 for it and guess what you could still buy between 1 and 2 gallons 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.
Now I know the price of gold and silver fluctuates a lot and to be honest I am not sure silver is good to buy right now (although I could be wrong) but I am not an expert. 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 Wally-World 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.
Just my observation. Duke.


  1. Duke, your 'observation' is spot (get it, spot) on.

  2. Duke, I use the “suit of clothes” analogy all the time to describe what is happening to us money wise. It goes over most people’s heads. Then again, most people ignore it as long as the Stock Market still goes up. They don’t even get that the market isn’t rising, the dollar is falling, and the market is actually staying pretty level. It worries me when gold goes up, the stock market goes down, and the talking heads babble on about a 300 point drop being a “small bump because of the approaching weekend” instead of “fecal material missing the fan and hitting the wall,”

    And don’t let Stephen pre-1965 nickel and dime you with the bad jokes. He’s got tons.

  3. Oh, and I am honored to have made your blog list. Thanks!

  4. Stephen, thank you for the affirmation,
    Mudbug, you are right and I am glad to have you on my blog list.

  5. With the prices so high if you buy "IN" now don't you risk having the bottom fall out? I was told by a wise prepper years ago not only should you buy gold/silver but spices to trade with. His thinking was the spices would be worth as much to someone who wanted them. I just wish that when I was younger I listened.

  6. And there is an explanation that helped it make sense. I am a fairly smart woman but all this stock market fail and run for the silver and the different explanations were so confusing. Thank you!

  7. Rob's Rangers, you may be right prices are high right now and we don't know which way they will go which is why I said I don't know if it is a good buy right now however if you bought either silver "rounds" or "Junk Silver" (old coins) a little each week/month over time it would average out I think. If silver get's really high dimes will be worth a lot. Right now a pre '64 dime is about $3 not a lot to gamble on now but silver has tripled in price over the last 2 years. I also look at charts which show the history of the prices and I would not buy if it is on a peak, of course you never know for sure.
    Lila, glad it helped a little.